Nine clauses that cost owners real money.

None of what follows is unusual or improper. These are standard commercial terms that exist because factors take real risk. The problem is that owners sign them without reading them, and then discover the cost eighteen months later when they want to leave.

1. Auto-renewal and the notice window

Most agreements run an initial term — often twelve months — and renew automatically unless you give written notice inside a specific window, sometimes 30 or 60 days before the anniversary. Miss it and you are committed for another full term. Put the notice date in your calendar the day you sign.

2. Minimum volume commitments

You agree to factor a minimum dollar amount monthly. Fall short and you pay the fee on volume you never factored. This is the clause that most often turns a seasonal business's good rate into a bad one.

3. Early termination fees

Leaving before the term ends can trigger a fee calculated as a percentage of your remaining minimum commitment. On a twelve-month agreement broken in month three, that can be a five-figure number. Ask for the formula in writing and run it.

4. The universal lien

Read what the UCC-1 actually covers. Many agreements take a blanket lien on all assets, not just receivables. That will collide with an equipment lender or a future acquisition loan, and unwinding it takes time you may not have when a deal is on the clock.

5. Recourse periods

In a recourse facility, when does an unpaid invoice become your problem again — 60 days, 90, 120? And how is the buy-back handled: deducted from your next funding, or demanded in cash? On a tight week, the difference matters enormously.

6. What non-recourse actually covers

Usually only formal customer insolvency. Not a dispute. Not a short-pay. Not a customer who is slow, or unhappy, or simply refuses. If you are paying a premium for non-recourse, read the definition and ask for examples of claims they have actually paid.

7. Reserve release timing and offset rights

When is the reserve released after your customer pays — immediately, weekly, or at the factor's discretion? And what can the factor hold it against? Broad offset rights mean your reserve can be held against a dispute on an entirely unrelated invoice.

8. Customer credit approval and concentration limits

The factor decides which of your customers are approved and at what limit. If your biggest customer hits a concentration cap, you cannot factor the invoices you most need funded. Find out the caps before you build your business plan on the facility.

9. Notification and how your customers are told

Most factoring is notification-based: your customers are told to pay the factor directly. How that notice reads, and how the factor's collections team speaks to your customers, becomes part of your reputation. Ask to see the notification letter and the collections script. A factor that chases your customer aggressively at day 35 can cost you the customer.

The five questions to ask before signing

• Give me the complete fee schedule as a document — every fee, no exceptions.
• Show me the fee on a $10,000 invoice paying on day 32, day 46 and day 61.
• What is my notice window to terminate, and what is the early termination formula?
• Does your UCC filing cover all assets or only receivables?
• Which of my customers will you approve, and at what concentration limit each?

A salesperson who will not answer those five in writing has told you what you need to know.