Termination fees

Termination fees are charges that may apply when a factoring relationship ends before a stated term or without required notice.

Key takeaways
  • Termination fees can be substantial and are often tied to the remaining contract term.
  • Automatic renewal clauses can reset the term if notice is not sent by the stated deadline.
  • The full exit cost includes the termination fee, reserve recovery timing, and UCC filing release.
  • Calendar the notice deadline immediately after signing.

Termination fees apply when the relationship ends before the agreed term or without required notice.

The fee may be a fixed amount, a percentage of facility size, a multiple of average fees, or another formula.

Before signing

  • Find the initial term.
  • Find automatic renewal language.
  • Calendar the notice deadline.
  • Ask for the lien release process and timing.

Related reading

Sources

  • International Factoring Association - International Factoring Association. Accessed 2026-05-19. Industry association source for factoring terminology and industry context.
  • Secured Finance Network - Secured Finance Network. Accessed 2026-05-19. Industry education source for secured finance and asset-based lending context.
  • Uniform Commercial Code Article 9 - Uniform Law Commission. Accessed 2026-05-19. Reference for secured transactions concepts including receivables and filings.
Financial disclaimer. This page is educational only and is not financial, legal, tax, accounting, or credit advice. Factoring terms vary by provider and contract. Read the full disclaimer.