The Future Receipts Sale Agreement is a sophisticated financing instrument used in the Canadian market as an alternative to traditional lending arrangements. It enables businesses to receive immediate funding in exchange for selling a percentage of their future receipts to a financing company. This type of agreement is particularly suitable for businesses with regular cash flows seeking working capital without taking on traditional debt. The document must comply with Canadian federal and provincial regulations, including securities laws, the Personal Property Security Act, and consumer protection legislation where applicable. It typically includes detailed provisions for purchase price calculation, payment mechanisms, security interests, and risk mitigation measures. The agreement is structured to protect both the purchaser's investment and the merchant's ongoing business operations while ensuring regulatory compliance.
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1. Parties: Identification of the purchaser and seller (merchant), including full legal names and addresses
2. Background: Context of the agreement, nature of the merchant's business, and purpose of the future receipts sale
3. Definitions: Key terms used throughout the agreement, including 'Future Receipts', 'Purchase Price', 'Specified Percentage', etc.
4. Purchase and Sale: Core transaction terms including purchase price, total purchased amount, and specified percentage of future receipts
5. Payment Terms: Mechanics of daily/weekly payments, payment methods, and reconciliation process
6. Merchant Representations and Warranties: Statements about business condition, authority to enter agreement, and accuracy of financial information
7. Purchaser Representations and Warranties: Statements about purchaser's authority and compliance with laws
8. Merchant Covenants: Ongoing obligations including maintaining bank accounts, conducting business normally, providing financial information
9. Security Interest: Grant of security interest in future receipts and other assets as collateral
10. Events of Default: Circumstances constituting default and consequences thereof
11. Remedies: Purchaser's rights and remedies upon default
12. Term and Termination: Duration of agreement and termination provisions
13. General Provisions: Standard clauses including notices, amendments, governing law, etc.
1. Personal Guarantee: Used when personal guarantee from business owner(s) is required for additional security
2. Credit Card Split Arrangements: Include when payment processing split is part of collection mechanism
3. Cross-Collateralization: Used when multiple agreements exist between parties requiring cross-default provisions
4. Reconciliation Procedures: Detailed procedures for periodic reconciliation when complex payment arrangements exist
5. Working Capital Restrictions: Include when restricting merchant's ability to obtain additional financing
6. Change of Control: Used for larger merchants where ownership changes need to be controlled
7. Insurance Requirements: Detailed insurance obligations when specific coverage is required
1. Schedule A - Purchase Price Calculation: Detailed breakdown of purchase price, fees, and deductions
2. Schedule B - Payment Schedule: Expected payment amounts and timing based on historical receipts
3. Schedule C - Bank Account Information: Designated account details for payments and collections
4. Schedule D - Financial Statements: Recent financial statements and projections
5. Schedule E - Permitted Liens: List of existing liens and encumbrances on business assets
6. Appendix 1 - Form of Personal Guarantee: Standard form personal guarantee if required
7. Appendix 2 - Daily Payment Authorization: Authorization for automatic daily/weekly payments
8. Appendix 3 - Reconciliation Report Template: Standard format for periodic reconciliation reports
Relevant legal definitions
Clauses
Relevant Industries
Retail
Restaurant and Hospitality
E-commerce
Healthcare Services
Professional Services
Manufacturing
Distribution
Transportation and Logistics
Technology Services
Construction
Relevant Teams
Legal
Finance
Treasury
Risk Management
Commercial
Operations
Compliance
Credit
Collections
Business Development
Merchant Services
Relevant Roles
Chief Financial Officer
Finance Director
Treasury Manager
Legal Counsel
Commercial Director
Business Development Manager
Risk Manager
Credit Manager
Operations Manager
Compliance Officer
Financial Controller
Merchant Services Manager
Account Executive
Collections Manager
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