---
title: "Termination fee"
url: https://carrierkyc.com/glossary/termination-fee
description: "A termination fee is a charge in a factoring contract that the carrier owes if it ends the agreement early or without the required notice."
---

# Termination fee

**Definition:** A termination fee is a charge in a factoring contract that the carrier owes if it ends the agreement early or without the required notice.

Also called: Early termination fee, Exit fee. Category: Factoring.

Termination clauses take several forms: a flat fee, a percentage of average monthly volume multiplied by the months left in the term, or an auto-renewing term with a narrow notice window that the carrier misses. Some contracts also require the carrier to buy back all open invoices on exit.

For the factor, the fee recovers onboarding and underwriting costs on clients who leave early. Pushed too hard, it does damage. A client fighting a fee is slow to answer calls, and a factor that delays a [letter of release](https://carrierkyc.com/glossary/letter-of-release) or [UCC-3](https://carrierkyc.com/glossary/ucc-3) while it argues leaves brokers unsure who to pay.

> **Note: When you are the new factor** A carrier leaving its prior factor mid-dispute deserves a direct question about why. Get the payoff letter, the release and the UCC-3 lined up before you fund, and confirm them with the prior factor yourself.

Explain the term, renewal and exit costs in writing at signing. The [guide to starting a factoring company](https://carrierkyc.com/guides/how-to-start-a-freight-factoring-company) covers contract basics. General information, not legal advice: have counsel review your contract terms.

## Related

- [Letter of release (LOR)](https://carrierkyc.com/glossary/letter-of-release)
- [UCC-3 amendment](https://carrierkyc.com/glossary/ucc-3)
- [Factoring fee](https://carrierkyc.com/glossary/factoring-fee)
- [Freight factoring rates in 2026: what carriers pay and the real APR](https://carrierkyc.com/guides/freight-factoring-rates)
- [How to start a freight factoring company](https://carrierkyc.com/guides/how-to-start-a-freight-factoring-company)