H.R. 3244 — CASH Act

This section requires factoring providers to furnish small business concerns with a written disclosure of specified terms prior to entering a factoring facility agreement (i.e., an agreement under which a business sells accounts receivable at a discount for immediate cash) if the aggregate transaction amount, including fees, is less than $500,000—or is reasonably expected to be, if unspecified. The disclosure must include (1) the discount amount or percentage between a claim's face value and purchase price; (2) any applicable fees; (3) reserve amount and terms; (4) agreement duration; and (5) a $10,000 claim example illustrating the discount, fees, maximum reserve, and net payment. This section specifies that the disclosure requirement does not apply to modifications of such agreements.

This section preempts any state or political subdivision requirement that is in addition to, or inconsistent with, the requirements of this Act with respect to disclosures by providers to small business concerns regarding the terms of factoring transactions (i.e., sales of accounts receivable for immediate cash) under a factoring facility agreement.

This section defines the following terms for purposes of the Act: (1) factoring transaction (i.e., an agreement for the sale of accounts receivable of a small business concern for supplied goods or rendered services, excluding loans or advances repaid from future receivables); (2) factoring facility agreement; (3) provider (i.e., an individual or entity that purchases accounts receivable in a factoring transaction and is engaged in interstate commerce); (4) reserve (i.e., the portion of a factoring payment withheld by the provider pending payment of the underlying claims); and (5) small business concern (as defined in section 3 of the Small Business Act (15 U.S.C. 632)).