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Auto-renewal
Also called evergreen clause, automatic renewal, rollover clause.
The clause extending an agreement for another full term unless written notice is given inside a defined window, which is standard in factoring agreements, equipment leases and processing contracts.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
Three moving parts, and each is drafted to be missed.
Why it costs money rather than just time
Auto-renewal bites when it sits alongside a minimum: a monthly minimum fee or minimum volume in a factoring agreement, a minimum commission in a processing agreement. Renewing a facility you have stopped using still obliges you to the minimums for the new term, or to an early termination fee calculated on the unexpired portion, which frequently comes to the same number.
Equipment leases add a second version: the lease continues at the same rent, month to month or for a further fixed period, if you do not give notice and return the equipment by the deadline. Paying full rent on a machine the lessor has already largely recovered is the most expensive money in equipment finance.
What termination actually does
Read the wind-down. Most factoring agreements provide that the agreement does not end until all purchased invoices have collected and all obligations are satisfied, so notice starts a process rather than stopping one. Reserves can be held through that period.
Where this one catches people
Diary the window the day you sign — both the date it opens and the date it closes — because you will not remember in eleven months and nobody is going to remind you. A factoring agreement signed in a rush in March renews in March whether or not you stopped using it in June.
When you do give notice, give it in the exact form the contract specifies, to the exact address, and keep the delivery receipt. Then confirm receipt separately and get an acknowledgement in writing. Both halves matter: a notice that was valid but that the funder claims never arrived is the same problem as a notice sent the wrong way.
Worked through
Illustrative. A factoring agreement runs for one year with a 3,000 monthly minimum fee, auto-renewing for a further year unless written notice is given between 90 and 60 days before the anniversary.
You stop factoring in month seven because a bank line replaced it. You forget the window. The agreement renews.
The minimum applies through the renewal term: 12 × 3,000 = 36,000 owed on a facility you are not using. Terminating mid-renewal usually does not help, because the early termination fee in most such agreements is the remaining minimums for the unexpired term — the same 36,000, less whatever months have run.
The notice would have cost one certified letter.
Figures in the example are illustrative. They show the arithmetic, not a quote — what any one lender would charge is on that lender's page, where it is published at all.
Where you will meet this term
Read next
Auto-renewal — common questions
What does auto-renewal mean?
The clause extending an agreement for another full term unless written notice is given inside a defined window, which is standard in factoring agreements, equipment leases and processing contracts.
Where does auto-renewal catch people out?
Diary the window the day you sign — both the date it opens and the date it closes — because you will not remember in eleven months and nobody is going to remind you. A factoring agreement signed in a rush in March renews in March whether or not you stopped using it in June.
Is auto-renewal the same as an interest rate?
Auto-renewal is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does auto-renewal apply to?
Business Line of Credit, Equipment Financing, Invoice Financing, Asset-Based Lending, Credit Card Processing.
Is there a worked example of auto-renewal?
Yes, on this page, and it is labelled illustrative. It shows the arithmetic, not a quote from any lender.
What else should I read alongside auto-renewal?
Early termination fee, End-of-term option, Equipment lease, Exclusivity clause, Factoring.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.