Factoring Companies | Invoice Factoring Directory

Provided by Joel Clark and Diversified Resources

 

 

Factoring Companies in the US and World Wide

Glossary of Factoring Terms

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Account Debtor:
Your customers, the company that purchases your goods or services.

Accounts Payable:
Your business’s debts. Any amount owed by you for goods or services your business purchased.

Accounts Receivable:
Payables due to you from those you do business with. Invoices generated by your business to your customers for completed goods or service. Balance due from a clients/customers on a current account.

Accounts Receivable Financing:
Short term loan or cash advance in proportion to value of receivables. Also referred to as invoice discounting, factoring and ledger line of credit

Advance Rate:
The rate or percentage of your invoice that will be advanced to you.

Chargeback:
In Recourse Factoring this is the amount of money owed to the Factor for unresolved invoices. There is a predetermined time period in which this occurs and is generally deducted from available reserves or future funding. In Non-Recourse factoring this is the amount of money owed to the Factor for unpaid invoices due to a disputed invoice.

Collateral:
The assets your company pledges to the factoring company to secure against the advanced funds. These assets are subject to forfeiture if the debts cannot be paid or you default the contract.

Credit Limits:
A monetary limit of exposure that a Factor places on a client’s Factoring Account as a whole and a separate monetary limit of exposure that a Factor places on each individual Account Debtor.

Due Diligence:
The investigative process that a Factor takes prior to entering into business with a company.

Face Value:
Total dollar amount of an invoice owed by an Account Debtor.

Factoring:
This term is generally used interchangeably to describe invoice discounting and accounts receivable finance. All three financial tools: factoring, invoice discounting and accounts receivable finance are variations of the same transaction. Using your receivables to obtain working capital

Invoice discounting:
Selling your open Accounts Receivables or Invoices to a third party at a discounted rate in order to receive working capital for your business. This third party is generally known as the factor or funder

Lien:
A legal claim against an asset or property as evidenced by a UCC filing. Note: It’s a good plan to leave receivables unencumbered when obtaining traditional loans if possible, This can ease transition to factoring if cash flow improvement is needed.

Non-Recourse Factoring:
A type of factoring where the Factor retains the credit risk. Non-Recourse does not include accounts that are disputed or remain unpaid outside of bankruptcy, liquidation or debtor proof on financial insolvency.

Notice of Assignment:
A notice sent to Accounts Debtors that states that invoices have been assigned and sold to the Factor and is now payable to the factor.

Recourse:
A type of factoring where your business retains the risk. Should the invoice not be paid in a predetermined time period, the money advanced to your business must be returned to the factor or substituted with new payable invoices.

Reserve:
The difference between the face value of the invoice and the funds advanced by the Factoring Company until purchased invoices are paid. These funds are held by the Factor to protect against disputes between you and your Account Debtors, short pays or against non-payment of the invoice.

Securitization:
The process of creating a pass-through, such as the mortgage pass-through security, by which the pooled assets become standard securities backed by those assets. Also, refers to the replacement of non-marketable loans and/or cash flows provided by financial intermediaries with negotiable securities issued in the public capital markets.

Terms of Sale:
The agreement between you and your customers as to the terms of sale. A predetermined period of time allowed for payment of bills or invoices.   

Verification:
The process by which a financial institution or funder confirms the paperwork on the invoice is in order, That the product or services are accurately documented and the funder credit is secured. Much of this an be done by phone, fax and email

 

 

 

 

 

Factoring

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