Glossary · contract

Purchase and sale agreement

Also called receivables purchase agreement, RPA, revenue purchase agreement, future receivables sale agreement.

The contract documenting an advance as a sale of a specified amount of future receipts rather than a loan, containing the purchase price, purchased amount, specified percentage and reconciliation terms.

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

Structurally it is not a loan document and is drafted not to resemble one. There is no interest rate, no maturity date, no principal and no amortization schedule. In their place: a purchase price, a purchased amount, a specified percentage of receipts, a reconciliation mechanism and a set of representations about the business.

## What to read first
- The specified percentage and how the estimated daily or weekly payment was derived from it
- The reconciliation clause - shall or may, and what documentation it demands
- Events of default, particularly the ones that are not about missed payments: additional financing, processor changes, account closure, deposit diversion
- The guarantee, and whether the operative sentence guarantees performance or all obligations
- Governing law and venue, which decide where any dispute is heard and under which state's law
- Any confession of judgment, in the jurisdictions where one is still enforceable against a commercial defendant

## Why it is drafted this way
Every purchase-supporting feature in the document does double duty: it operates commercially and it defends the characterisation of the transaction if a court is later asked whether this was really a loan. Reconciliation rights, the absence of a fixed term, and recourse limited to specified misconduct are the three features most often cited in that analysis, and the analysis is state-specific and fact-specific.

Where this one catches people

The reconciliation clause exists partly for the funder's benefit in litigation, which is why it is nearly always present and often difficult to use. Its presence tells you the document was drafted competently. Only the verb, the conditions and the documentation requirements tell you whether it will do anything for you in a bad month.

Where you will meet this term

Merchant Cash Advance Revenue-Based Financing

Read next

Confession of judgment (COJ)A pre-signed admission of liability that lets a funder obtain a court judgment on default without suing you, … Merchant cash advance (MCA)A purchase of a fixed dollar amount of a business's future receipts at a discount, collected as a percentage … Percentage of receivablesThe share of the business's receipts a funder has bought and is entitled to collect - the operative obligatio… Performance guaranteeA guarantee limited to the merchant's conduct - not blocking the debits, not closing the account, not misrepr… Promissory noteThe written promise to pay a sum on defined terms - the instrument that makes a transaction a loan, with a st… Purchased amount (RTR)The total dollars of future receipts the funder has bought and is entitled to collect - a fixed figure set at… Reconciliation clauseThe contract provision setting out whether, when and how the fixed payment gets adjusted back to the agreed p… UsuryCharging interest above what state law permits on a loan; the doctrine applies to loans, which is why the loa…

Purchase and sale agreement — common questions

What does purchase and sale agreement mean?

The contract documenting an advance as a sale of a specified amount of future receipts rather than a loan, containing the purchase price, purchased amount, specified percentage and reconciliation terms.

Where does purchase and sale agreement catch people out?

The reconciliation clause exists partly for the funder's benefit in litigation, which is why it is nearly always present and often difficult to use. Its presence tells you the document was drafted competently. Only the verb, the conditions and the documentation requirements tell you whether it will do anything for you in a bad month.

Is purchase and sale agreement the same as an interest rate?

Purchase and sale agreement 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 purchase and sale agreement apply to?

Merchant Cash Advance, Revenue-Based Financing.

Is there a worked example of purchase and sale agreement?

Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.

What else should I read alongside purchase and sale agreement?

Confession of judgment, Merchant cash advance, Percentage of receivables, Performance guarantee, Promissory note.

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.