How to Get a Release Letter from a Factoring Company – FactorFreight
Last Updated and Fact-Checked: July 2026
When you decide to end your relationship with a factoring provider, you need more than just an email confirming the cancellation. You need a formal legal release.
To get a release letter from a factoring company, you must fulfill all contract obligations, ensure all advanced invoices are paid (either by the brokers or via a buyout from a new factor), and formally request the document from your account manager or the legal department.
Overview
A Release Letter (also known as a Letter of Release) is a legally binding document stating that the factoring company no longer claims a security interest in your accounts receivable. It effectively cancels the original Notice of Assignment. Without this letter, brokers will continue to pay your old factor, and new factors will refuse to fund you.
Practitioner Note: “In my experience, factoring companies use the release letter as leverage. They will not issue it until every single penny they are owed—including any factoring contract termination fees trucking—is paid in full.”
Key Factors to Consider
The Open Aging
The release letter is contingent on your ‘open aging’ being cleared. If a broker hasn’t paid an invoice that the factor advanced you money for, the factor still owns that invoice.
The Buyout Scenario
If you are switching factors, your new company will handle paying off the open aging. The release letter is usually issued simultaneously with the wire transfer during the buyout process switching factoring companies.
The UCC-3 Termination
The release letter goes hand-in-hand with a UCC-3 termination, which removes the public lien on your business. See what is a UCC filing in trucking factoring.
Step-by-Step Process
- Provide Proper Notice: Ensure you have legally canceled your contract according to the timeline. Read how to cancel a freight factoring contract safely.
- Clear Your Balance: You can wait for brokers to pay off the remaining invoices, pay the factor out of pocket, or arrange a buyout.
- Request the Letter: Email your account manager: “I am requesting a formal Letter of Release and confirmation that a UCC-3 termination will be filed immediately upon settlement of my account balance.”
- Distribute to Brokers: Once received, immediately forward the release letter to all your brokers so they know to pay you (or your new factor) directly.
Common Mistakes & Pitfalls
A massive pitfall is assuming the factor will notify your brokers that the contract is over. They rarely do. It is your responsibility to distribute the release letter to your customers. If you don’t, the brokers will keep paying the old factor, and you’ll have to fight to get those misdirected funds back.
Frequently Asked Questions (FAQ)
How long does it take to get a release letter? Once your balance is zero, it should take 24 to 48 hours. If it takes longer, they are likely stalling.
Can a factoring company refuse to give me a release letter? Yes, if you owe them money or if you are in factoring contract breach of contract penalties. They hold the letter until the debt is resolved.
Disclaimer: This article is for informational purposes only and does not constitute financial or legal advice. Privacy Policy
About the Reviewer: Dr. Alex Merton is the Senior Financial Researcher at FactorFreight. With over 15 years in commercial logistics finance, Alex specializes in helping small carriers and owner-operators navigate complex cash flow solutions and factoring contracts.