A buyout fee is a specific charge applied by a factoring company when a business decides to terminate its factoring agreement and repurchase its outstanding factored invoices.
This fee is an integral part of invoice factoring arrangements. It comes into effect when a business chooses to conclude its contract with a factoring company before all the invoices that were factored have been collected through the standard payment process. The primary purpose of the buyout fee is to enable the original business to reacquire ownership of these outstanding invoices, effectively buying them back from the factoring company.
Key aspects of a buyout fee include:
| Aspect | Description |
|---|---|
| Definition | A charge imposed by a factoring company. |
| Context | Exclusively applicable within invoice factoring agreements. |
| Trigger | Occurs when a business makes the decision to terminate its existing factoring agreement. |
| Purpose | To facilitate the repurchase by the business of its outstanding invoices that were previously factored. |
This fee ensures that the financial relationship between the business and the factoring company can be formally concluded, with all outstanding factored assets transferred back to the original business.
