Glossary of Terms

"A" Credit Customers
Consumers with impeccable credit, who can obtain a loan from traditional lenders.

"B" through "D" Credit Customers
These consumers have less than perfect to bad credit and usually cannot qualify for traditional financing. Also called sub-prime credit customers.

Ability to Pay
Refers to a borrower’s ability to make the interest and principal payments on a debt.

Acceleration Clause
A contract stating that the unpaid balance becomes due and payable if specific actions transpire, such as failure to make interest payments on time.

Acceptance
A contractual agreement instigated when the drawee of a time draft accepts the draft by writing the word "accepted" thereon. The drawee assumes responsibility as the acceptor and for payment at maturity.

Account
In the context of bookkeeping, refers to the ledger pages upon which various assets, liabilities, income, or expenses are represented. In the context of investment banking, this refers to the status of any securities sold and owned, or the relationship between parties to an underwriting syndicate. In the context of securities, the relationship between a client and a broker/dealer firm allowing the firm's employee to be the client's buying/selling agent.

Account Balance
The credits minus the debits at the end of a company’s reporting period.

Account Debtor
The person, business or organization responsible for paying an invoice. In the case of factoring, the account debtor is the customer whose name is on the invoice sold to the factor.

Account Statement
In the context of banking, this refers to a summary of all account balances. In the context of securities, it is a summary of all the transactions and positions, both long and short, between a broker/dealer and a client and a client.

Accounting Earnings
The earnings of a company as reported on the income statement.

Accounting Exposure
The change in the value of a firm's foreign currency-denominated accounts due to changes in any exchange rates.

Accounting Insolvency
When the total liabilities exceed the total assets. A company with a negative net worth is considered insolvent.

Accounting Liquidity
The ease and quickness with which any assets can be converted to cash.

Accounts Payable
The money owed by a company such as bills to be paid as part of the normal course of business. Accounts Payable is one of the most common liabilities which normally appear in the Balance Sheet listing of liabilities.

Accounts Receivable
Monies due for products or services that have been already delivered due at a specific time in the future. Typically these refer to Business to Business transactions. Also referred to as Trade Credit or sales on Open Account Terms. These funds are considered a liquid asset on the balance sheet and are generally expected to be paid in less than ninety days.

Accounts Receivable (A/R)
Also called receivables; money owed to a business by customers who have bought goods or services on credit; current assets that turn into cash as customers pay their invoice for those assets.

Accounts Receivable Aging Report
A business report showing how long accounts receivable from each customer have been outstanding. It indicates the receivables that are current and the amounts outstanding for 30 days, 60 days and so forth.

Accounts Receivable Aging Schedule
A classification process, as reported on a schedule by time intervals (30 day increments & current), 30 days, 60 days, 90 days, 90+ days, used to analyze the amount of money owed to a business by its customers. Accounts receivable aging schedule is used by credit grantors (such as banks and factors) to determine the probability of collection, as it shows patterns of payment and delinquency.

Accounts Receivable Factoring
See Factoring.

Accounts Receivable Financing
A financing method in which a business owner sells accounts receivable at a discount to a third-party funding source to raise capital. The Receivables Exchange is a receivables financing solution that provides flexibility and control by giving the Seller the option to post one or multiple receivables as often as they wish. More on Accounts Receivable Factoring

Accounts Receivable Turnover
Ratio of net credit sales to the average accounts receivable. This is a measure of how quickly customers pay bills.

Accounts Receivables
A commercial debt due for repayment usually in 30 - 90 days. In the factoring industry the accounts receivable is what a company sells to a factor.

Accrual Accounting
An accounting method whereby income and expense items are recognized as they are earned or incurred even though they may not have been received or actually paid in cash. The opposite of cash basis accounting.

Accrual Basis
In the context of accounting, practice in which expenses and income are accounted for as they are earned or incurred, whether or not they have been received or paid.

Accrued Discount
The interest that accumulates on savings bonds from the date of purchase until the date of redemption or final maturity - whichever comes first.

Accrued Interest
When applied to convertible securities, this is the interest that has accumulated between the most recent payment and the sale of a bond or other fixed-income security. At the time of sale, the buyer pays the seller the bond’s price plus any interest accrued through the settlement date of the sale, calculated by multiplying the coupon rate by the fraction of the coupon period that has elapsed since the last payment.

Acknowledgment Form
Form sent to the client's customer account debtors to confirm that the invoice the client is selling does exist and that they will remit payment directly to factor.

Acquisition
A loan to assist in acquiring the assets of a business.

Active Income
Income from an active business as opposed to passive investment income, according to U.S. tax codes.

Adjustable Rate
Applies to convertible securities and the interest rate or dividend adjusted periodically, usually according to a standard market rate outside the control of the bank or savings institution, such as that prevailing on treasury notes or bonds.

Administration Charge
A charge by the factor on each invoice for the provision of the service.

Advance
The percentage of an invoice's face value that a factor pays upon its purchase.

Advance Amount
The amount that a Buyer is willing to pay or advance to the Seller incident to the purchase of a receivable.

Advance Billing
An invoice raised in advance of the provision of the service to which it relates.

Advance Rate
The money advanced to the client by the factor following invoice presentation and before actual collection of funds from the customer. Advances are calculated as a percentage of the total face value of the invoice and usually range between 70 to 90%.

After-Tax Profit Margin
The ratio of net income to net sales.

After-Tax Real Rate of Return
The after-tax rate of return minus the inflation rate.

Aged Debtors Ledger
A listing of outstanding balances per customer and split by either the month in which the respective invoices where raised or the dates they become due.

Agency Bank
A form of organization commonly used by foreign banks to enter the U.S. market. An agency bank cannot accept deposits or extend loans in its own name; it acts as agent for the parent bank.

Agency Discounting
Also referred to as disclosed invoice discounting. Where customers are aware of the factors involvement, but the company maintain the responsibility of managing their sales ledger.

Aging Schedule
A table of accounts receivables that are broken down into age categories (such as 0-30 days, 30-60 days, and 60-90 days), which is used to determine if customer payments are on schedule.

Amortization
The gradual, systematic payment of a debt, such as a mortgage or other loan, in installments of principal and interest for a definite time, so that at the end of that time, the debt will have been paid in full.

Amortization Schedule
A schedule that shows the frequency of when and what amounts of interest and principal will be repaid until maturity.

Angels
Individuals providing venture capital.

Annual Basis
A technique in statistics of taking a figure covering a period of less than one year and extrapolating it to cover a full one-year period. The process is known as annualized. Annual percentage rate (APR)–the periodic rate times the number of periods in a year. (A 5 percent quarterly return has an APR of 20 percent.)

Annual Percentage Yield (APY)
The effective or true annual rate of return. The APY is the rate actually earned or paid in one year, taking into account the affect of compounding. The APY is calculated by taking one plus the periodic rate and raising it to the number of periods in a year. For example, a 1% per month rate has an APY of 12.68% (1.01^12).

Annual Rate of Return
One of the ways of calculating the annual rate of return. If the rate of return is calculated on a monthly basis, we sometimes multiply this by 12 to express an annual rate of return. This is often called the annual percentage rate (APR). The annual percentage yield (APY) includes the effect of compounding interest.

Annual Report
The annual record of a publicly held company's financial condition. It includes a description of the firm's operations, its balance sheet and income statement. The SEC rules require that it be distributed to all shareholders. A more detailed version is called a 10-K.

Anticipation
Arrangements whereby customers who pay before the final date may be entitled to deduct a normal rate of interest.

Antitrust Laws
Legislation established by the federal government to regulate trade and prevent the formation of monopolies.

Appreciation
The Increase in the value of an asset.

Approved Debtor / Balance
A customer approved by the factor for the advance of the agreed prepayment.

Articles of Incorporation
A document filed with a U.S. state by the founders of a corporation. After approving the articles, the state issues a Certificate of Incorporation; the two documents together become the Charter of Incorporation.

Asset
Anything having commercial or exchange value that is owned by a business, institution or individual. A business' assets might include its real estate, equipment inventory, intellectual assets such as copyrights or trademarks, and accounts receivable.

Asset Backed Lending
Lending by an institution where specific security is provided i.e. invoice finance, asset finance (HP and leasing), stock finance. Opposed to lending under a blanket charge or debenture.

Asset Based
A business loan where the borrower pledges as collateral for the loan any assets used in the conduct of his or her business. Funds are used for business related expenses. All asset-based loans are secured.

Asset Classes
Categories of assets, such as stocks, bonds, foreign securities or real estate.

Asset-Based Financing
A method of finance whereby assets are used as security for cash advances to a business; ideal for startup companies when credit is tight and financing is needed for growth.

Asset-Based Lending
A form of lending where the lender uses collateral, such as A/R, equipment or inventory, as security against the loan.

Assign Ability
The ability to assign (or sell) an income stream to another individual or business.

Assignee
The person or business entity that is given; obtains or buys the rights to an asset.

Assignment
A transfer of ownership or interest in a payment obligation between two or more parties.

Assignment of Collateral
The legal term used when accounts receivable are pledged to a lender as collateral for a loan.

Assignor
The person giving or selling an asset, subsequently forfeiting rights to that asset.

Associated Company
To a factor these include; Parent Companies, Subsidiary Companies, Companies with Common Shareholders, Companies with Common Directors, Franchisees.

Assumption
Becoming responsible for the liabilities of another party.

At Par
A price that is equal to nominal or face value of a security.

At Risk
Exposure to the danger of economic loss when used in the context of claiming tax deductions.

Auction Closing Date
The date that an auction closes and the winning bid is determined.

Audit
The examination of a firms books and accounting records usually conducted by an outside professional in order to determine whether the company is maintaining records according to generally accepted accounting principles.

Audit Trail
Resolves the validity of an accounting entry by a step-by-step record so that accounting data can be traced.

Auditor's Report
Section of a company’s annual report including the auditor's opinion about the veracity of any financial statements.

Authorized Signatory
An individual who is authorized to execute a binding document on behalf of a corporation, partnership or other legal entity.

Automated Clearing House (ACH)
A collection of 32 regional electronic interbank networks used to process transactions electronically with a guaranteed one-day bank collection float. Automatic funds transfer–transfer of funds from one account or an investment vehicle to another using telecommunications or electronic technology.

Availability
The amount remaining available to draw from the invoice finance facility, considering advances may already have been made.

Availability Float
Checks deposited by a company that have not yet been cleared.

Average Age of Accounts Receivable
The weighted-average age of all of the firm's outstanding invoices. Average collection period, or days' receivables–the ratio of accounts receivables to sales, or the total amount of credit extended per dollar of daily sales.

Average Rate of Return (ARR)
The ratio of the average cash inflow to the amount invested.

BACS Payment Bank Automated Clearing System
A payment made or received through this system. Payments will generally take c.3 days to reach the recipient.

Bad Debt
An outstanding debt that will not be paid, most often given the cessation of the company invoiced.

Balance Sheet
A financial statement that shows the value of a business at a particular point in time. The Balance Sheet consists of two columns, Assets and Liabilities, which must be equal.

Balloon
The balance of principal that is due and owing in its entirety at a specified point in time, but in any event, less than the time required to fully amortize the debt.

Bank Overdraft
An alternative to factoring with no credit management service.

Bankruptcy
Refers to statutes and judicial proceedings involving persons or businesses that cannot pay their debts and seek the assistance of the court in getting a fresh start.

Ban on Assignment (BOA)
A clause within a supplier's terms of trade that specifically bans the assignment of the benefits or proceeds of the sale or contract.

Base Rate
Base funding percentage above which an additional margin is added by the respective lender. All UK clearing banks currently operate with the same base rate determined by the Bank of England.

Beneficiary
The person or party entitled to receive the benefits, or proceeds, of the life insurance policy upon the death of the insured person.

Bill of Exchange
An unconditional order in writing, signed by a drawer such as a buyer, and addressed to the drawee, typically a bank, ordering the drawee to pay a stated sum of money to a payee, often a seller, on demand or at a fixed or determinable future time.

Bill of Lading
A shipping document providing instructions to the freight forwarder or shipper. This instrument also indicates who the seller and the buyer are.

Bill of Sale
A document used to transfer title of goods from the seller to the buyer.

Blanket Assignment
A legal transfer of ownership of all accounts receivable, both present and future as collateral for funding.

Borrowing Power
The maximum loan available to a borrower at a particular time based on the calculated value of the accounts receivable; the product of a borrower's advance rate times eligible accounts receivable.

Break-Even Analysis
A study of when sales volume equals the costs of generating those sales to include both fixed and variable cost.

Break-Even Point
The level of sales whereby you are neither making a profit nor incurring a loss. Break-even point is a combination of sales and costs that will yield a no-profit, no-loss situation and is also known as Break-Even Sales.

Bridge Loan
A short term loan to cover the operating needs of a company until permanent financing is arranged.

Broker
An individual in the business of assisting in arranging funding or negotiating contracts for a client buy who does not loan the money himself. Brokers usually charge a fee or receive commission for their service.

Business-Based Income Streams
Cash flow instruments that are paid to a business by another business or government. .Buyers Institutional investors from around the world (commercial banks, hedge funds, asset-based lenders, factors) looking to diversify their investments, broaden the reach of their portfolio and generate attractive investment returns. Buyers engage in competitive bidding to buy the receivables of Sellers on The Receivables Exchange.

Business Line of Credit
Business Lines of Credit (BLOC) are an ideal option for businesses that need periodic funding for items like making payments to your vendors, contractors, or employees. Business Lines of Credit offer much more flexibility than a Business Credit Card in regards to repayments terms and rates typically. BLOC's are typically required to be paid to a zero balance once in a 12 month period. How, they can always be drawn from again.

Business Loan
Business Loans are typically term loans either, fixed or variable, that are a perfect option for Businesses seeking items like equipment, repairs, expansion, renovations, and others large purchases.

Buyout Price
Sellers on The Receivables Exchange have the option to specify a “Buyout Price,” which if bid by a single Buyer, will result in the instantaneous awarding of the auction, thereby closing all further bidding.

Capital
The net worth (assets - liabilities + net worth) of a business; wealth used in trade. Monies left over after a business or individual has satisfied all debt.

Capital Investments
Money used to purchase long-term, fixed assets for a business, such as property, equipment, or investments.

Capital Lease
A lease of property or equipment that nearly resembles that of a loan where the lessee assumes all benefits and risks.

Capital Net Worth
The amount by which total assets exceed total liabilities. Also known as shareholder’s equity or book value, capital net worth is what would be left over for shareholders if the company were sold and its debt retired.

Cash Accounting
A method that recognizes revenues when cash is received and recognizes expenses when cash is paid out. Cash basis accounting is the opposite of accrual basis accounting.

Cash Flow
An analysis over a period of time revealing the availability, or lack, of cash. More simply put the difference between cash in (income) vs. cash out (expenses). Since money does not flow in and out at an equal rate, in most businesses, an analysis of cash flow is important, especially of businesses that are cyclical in nature, or subject to external forces.

Cash Flow Broker
Professional, whose primary purpose is to unite income stream sellers with funding sources. They may operate as referral sources or as the primary liaison for cash flow transactions.

Cash Flow Industry
The buying, selling, and brokering of privately held debt in the secondary marketplace; the marketplace where businesses and individuals get help managing their cash flow needs.

Cash Flow Instrument
Future payment or series of payments. Also called a debt instrument or income stream.

Cash Flow Specialist
A cash flow professional who brokers cash flow transactions or buys cash flow instruments.

Cash Flow Transaction
Occurs whenever a funding source pays cash to an individual or business in exchange for an income stream.

Cash Ratio
Ratio of cash and cash equivalents divided by liabilities. Demonstrates a company’s ability to cover all liabilities from cash.

Chapter 1
Affords businesses an opportunity to reorganize by restructuring debt and negotiating payment schedules.

Chapter 11
A Federal Bankruptcy Act where a debtor can maintain control of its business and operations, under court supervision, as long as current debts remain paid.

Charge Back
An amount of money owed to the factor or "charged back" to the client when the factor is unable to collect the Account Receivable that was factored, based on an agreed upon debtor non-payment clause in the Factoring contract. The factor will typically take this out of a reserve release or an advance.

Chattel Mortgage
A mortgage on personal property, given to secure a debt. Typically used in the sale of a business. Also called a security agreement.

CIS Certificate
Contractors within the construction industry are required by the Inland Revenue to deduct tax when paying sub-contractors. Only if the sub-contractor has the necessary CIS certification can the deduction be avoided. This is therefore of relevance to a factor, if invoices they have financed are liable to deduction by the customer (contractor). The factor's security being eroded. Very simply: * CIS 5 certificate permits gross payment by the customer * CIS 6 certificate permits payment gross to the company, but not to a third party, such as a factor. * CIS 4 requires deductions of tax to be made by the customer. If the nature of the company's business is subject to construction industry taxation then the particular certificate held will determine which factors are willing to be of assistance.

Client
The individual or company that sells its accounts receivables to a factor or other financial entities.

Collateral
An asset that is promised or given to a creditor (a factor or a financial institution) to guarantee the discharge of an obligation by the debtor. Upon default, the creditor may seize the asset and sell it to pay off the loan.

Collateral-Based Income Streams
Cash flow instruments that are secured by collateral.

Collectability
The ease of collecting in the full value of outstanding trade debts in the hypothetical situation that the company has ceased to trade. Affected by such issues as proof of delivery, disputes, contractual obligations etc.

Commercial Credit Insurance
Insurance against large losses from the uncollectability of accounts receivable.

Commercial Mortgage
A loan made on real estate, other than a residential property, in which a mortgage is given to secure the facility.

Commission
Fee paid to a broker for executing or referring a cash flow transaction.

Concentration
Used in reference to the spread of customers by balances outstanding. Some factors will apply a concentration limit, whereby should a single debtor exceed an agreed percentage of the total gross sales ledger at any one time then the amount above this limit would become 'unapproved'.

Confidential Factoring
An alternative expression for confidential invoice discounting. Some factors are considering the provision of a true confidential factoring facility. That is, whereby the factor will complete the credit control responsibilities, albeit as if they were the company.

Confidential Invoice Discounting
Relates to a company entering into a factoring arrangement whereby the sales ledger function remains fully with the company. All credit control functions are the companies responsibility and not the factors. The factoring relationship is not disclosed to the client's customers.

Confidentiality Agreement
A legal document where all parties agree to keep confidential unique information related specifically to said company.

Consignment Stock
Goods provided to a customer for which payment is required only once they have been sold on.

Constructive Delivery
Goods held for a customer that have already been invoiced but have not been delivered but stored on their behalf.

Consumer-Based Income Streams
Cash flows in which the party that owes payments is a consumer, a private individual.

Consummate or Consummation
The completed purchase and true sale of a receivable over The Receivables Exchange under Louisiana law resulting in all the Seller’s rights, title and ownership interest therein passing to, and solely vested, in the Buyer.

Consummation Date
The date on which the sale of a receivable is deemed to be completed or consummated under Louisiana law.

Contingency-Based Income Streams
Cash flows in which the recipient is not necessarily legally entitled to receive payments, or in which the amount of the payment is uncertain or contingent upon outside factors.

Contra Account
A customer that is also a supplier to the company.

Contract
A formal written statement of the rights and obligations of each party to a transaction.

Contractual Sales
Sales made within an over-riding supply agreement with the customer.

Control Account Summary
A monthly reconciliation of sales, credit note, receipts, adjustments completed by invoice discounting clients for the factor to check against their records.

Conversion
The process of converting a qualified prospect into an active client.

Corporate Resolution
An action taken by the vote of a corporation.

Corporation
A legal entity which can own property, incur debts, sue, and be sued. Corporations provide for limited liability, easy transfer of ownership and continuity of existence.

Correspondent Factor
An overseas factor that is prepared to work with a UK factor to assist with the collection of export debts. The reverse can also be true, that is a UK factor being the correspondent factor.

Cost of Good Sold
The cost of all of the materials needed to make the client's product.

Covenant
A rule, a law; a restriction prohibiting an individual or a company from performing unauthorized acts.

Covenants
In a loan or lease agreement, requirements that the borrower or lessee promise to do or not to do specified things such as maintain a certain level of liquidity or meet a certain level of earnings.

CPE - Credit Protection Element
The proportion of the administration charge applied to cover the provision of bad debt protection.

Credit
The extending of time in relation to when payment is required in return for product or services provided.

Credit Analysis
The process of analyzing information on companies and bond issues in order to estimate the ability of the issuer to live up to its future contractual obligations.

Credit Guaranty
A form of guarantying a debt from the debtor in the event of debtor insolvency.

Credit Insurance
If your customer fails to pay the invoice. You receive payments for your bad debts up to pre determined limits.

Credit Terms
Conditions under which credit is extended by a lender to a borrower or lessee.

Creditor
Refers to the party or business, to whom money is owed.

Current Account (Invoice Finance)
An account maintained by the factor in the name of the client for the recording of all transactions between the factor and the client.

Current Assets
Cash and cash equivalents that can be readily turned into cash, usually within three months or less but can be up to 12 months.

Current Liabilities
Debts or other obligations coming due within 12 months.

Current Ratio
Current assets divided by current liabilities. Demonstrates a company’s ability to cover short-term liabilities with short-term assets including cash and assets that can quickly be converted into cash.

Customer
Also referred to as the account debtor, this is the party to whom the original products or services were provided and to whom the factor shall then collect monies from under the terms and conditions of the factored invoice.

Days Inventory Outstanding (DIO)
Inventory/(Total Revenue/365) Also known as Days Sales of Inventory (DSI); the process of turning raw materials into cash; financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory into sales. Generally, the lower (shorter) the DIO the better.

Days Payables Outstanding (DPO)
Accounts Payable/(Total Revenue/365) A company's average payable period; an indicator of how long a company is taking to pay its trade creditors. DPO is typically looked at either quarterly or yearly (90 or 365 days).

Days Sales Outstanding (DSO)
Accounts Receivable/(Total Revenue/365) Days Sales Outstanding is a company's average collection period; an index of the relationship between outstanding receivables and sales achieved over a given period. A low number of days indicates that the company collects its outstanding receivables quickly. Days Sales Outstanding is calculated as total outstanding receivables at the end of the period analyzed divided by total credit sales for the period analyzed (typically 90 or 365 days), times the number of days in the period analyzed.

Days Working Capital (DWC)
Accounts Receivable + Inventory - Accounts

DBA (Doing Business As)
Used to designate the name of a business as it is commonly known rather than its legal name, the name of the owner, etc.

DBT
An abbreviation for "days beyond terms," which indicates how many days past the due date an invoice is late.

Debenture
A 'blanket' charge over all business assets. Registered at Companies House.

Debt Capacity
A company’s ability and willingness to repay a loan from past or anticipated cash flow or other sources.

Debt Financing
Acquiring loan or lease funding to purchase assets of continue operations.

Debt Instrument
Future payment or series of payments, or a debt that one party owes to another party. Also known as income streams or cash flow instruments.

Debt Ratio
Total debt divided by total assets. Demonstrates the amount of leverage a company has taken to acquire the assets it needs to operate its business.

Debt/Equity Ratio
An evaluation of debt to equity of a company. Demonstrates the amount of debt a company has compared it the equity either placed or earned in a company.

Debtor
One who owes something and makes payments to a creditor.

Debtor Credit Limit
Individual customers may be given a credit limit by the factor above which balances will become unapproved.

Default
The omission or failure to perform or fulfill a legal duty, obligation, or promise (i.e. to pay a debt).

Delivery Evidence
A document that proves delivery and invoicing of a shipment.

Depreciation
Amortization of fixed assets, such as property, plant, and equipment. An accounting charge only that could help reduce business tax liabilities.

Dilution
At any given time a debtor book against which the factor is advancing against will contain an element of debt that is likely to be subject to credit notes, discount rebate or adjustments. The factor will wish to establish this as part of agreeing the prepayment percentage advance against the debtor ledger.

DIP (Debtor-In-Possession) Financing
Financing provided to a company while under Chapter 11 Bankruptcy/Reorganization protection.

Direct Mail
Mail sent to large numbers of potential customers advertising a product or service and soliciting orders.

Directors Warranty
Director's indemnity giving liability in the event of the company breaching specific clauses within the invoice finance agreement. These usually relate to the fraudulent notification of debt.

Disclosed Invoice Discounting
An invoice finance facility that is disclosed to the customers of the company by way of a note on the company's invoices. Unlike factoring the credit management remains the responsibility of the company.

Disclosure
To tell a lender or investor anything that may be relevant and of material nature to the deal.

Discount Charge
Interest charge.

Discount Factoring
Arrangement whereby a factor purchases an account(s) receivable from a business (client) at a discount to the face value of that receivable. The factor earns a fee based on the number of days that the receivable remains unpaid, i.e., the longer the receivable remains unpaid, the larger the fee incurred.

Discount Fee
The amount earned by a factor on each invoice purchased. It is based on the period of time the invoice remains outstanding (unpaid) and is set forth and agreed upon by both parties in the Discount Schedule.

Discount Rate
The percentage of the face value of an invoice that a factor holds as its fee.

Discounting of Accounts Receivable
Loan financing based on the amount and due dates of the accounts receivable of a company. The accounts receivables are used as collateral.

Discretionary Debtor Credit Limit
A minimum credit limit applied to all customers irrespective any individual credit search information.

Dispute
A balance or invoice not accepted by the customer.

Doubtful Debt
A debt that has become doubtful that settlement will be made, given dispute or the viability of the customer.

Down Payment
Amount paid as a down payment to reduce the original principal balance and risk of the lender. For leases this is often called a capital reduction.

Drawdown
A request to the factor to transfer available funds from the invoice finance account to the company's trading bank account.

Due Diligence
Background check and research conducted by the factor to assess validity of a prospective factoring client and that client's customers.

Dunning Cycle
This is industry terminology for the process and timescale of reminder letters, phone calls etc used by the factor in the collection of outstanding invoices.

Earnings
The revenue a company earns after it covers (pays for) all of its costs including interest and taxes.

EBITDA
Abbreviation for earnings before interest, taxes, depreciation and amortization.

Encumbrances
A lien or any form of indebtedness owed against real or personal property. An encumbrance is also recognized as unearned equity.

Equity
The value or interest an owner has in property over and above any indebtedness owed on the property.

Escrow
The system by which money, documents, personal property or real property are held in trust for others by a disinterested third party until the terms and conditions of the escrow instructions made by the parties to the escrow are completed or otherwise terminated.

Export
The sale of goods or services whereby the customer company invoiced is outside the UK. Note this may still be relevant if UK to UK supply but invoiced to an overseas registered company.

Export Factor
As correspondent factor. See above.

Export Financing
Financial products designed to help companies sale their products in foreign markets.

Face Amount or Face Value
The total dollar amount of an invoice. This is the amount that has to be paid to the factor by client's customer, without consideration as to how much was advanced to the client.

Face Value
The current principal balance on an income stream.

Factor
The agent and/or organization that purchases a businesses accounts receivables and assumes collection of associated invoices from applicable clients.

Factoring
A financing method in which, under agreement to an all asset lien, a business sells their receivables to a third-party funding source known as a Factor. In this relationship, the Factor sets the rates and the business must sell all of their accounts receivable. Account Debtors are notified of the sale of receivables and payments are made directly

Factors & Discounters Association
A members association acting on behalf of factors to promote their interests and the use of invoice finance.

Factors Acknowledgment Form
A form sent to the client's customer by the factor, confirming that the client's invoice does exist and that the customer will remit the payment due under that invoice to the factor.

Factors Advance
The money the factor sends to the client up front, after the verification process is complete, and before the factor receives its money from the client's customer. The advance is figured as a percentage of the face value of the factored invoices.

Factors Charge-Back
An amount of money that is owed to the factor and is deducted or Charged-Back from the reserve or availability of the line due to an agreed upon non-payment by debtor clause in the Factors contract.

Factors Client
Refers to the business that is selling its accounts receivable to a factoring agent or organization.

Factors Fee
Refers to the fee the factor charges for providing advance funding of the client's accounts receivables amount.

Factors Reserve
A deposit maintained by the factor, to guard against disputes between the client and the customer, and to guard against bad debt losses due to customer non-payment. This is the money retained by the factor when the advance is sent to the client. The Reserve is sent to the client after the customer has paid the factor the money due on the invoice.

Factors Reserve Release
The amount of money released from the Factors Reserve once payment has been received and credited. The Reserve Release may be less any charge-back or fees associated with the services.

Factors Services
Services provided by the factoring agent to the client on behalf of the factoring process, such as credit analysis, credit guarantees and collection management.

Factors Verification
Process by which the factor verifies that the product or service provided by the client was received and accepted by the customer, and that the customer intends to pay the factor the money due under the invoice. This process takes place before the factor sends the advance to the client.

Fair Market Value
The highest value a company could expect to receive if assets are sold in an open market.

Federal Employee ID Number
A government-issued identification number used to identify businesses. This number is similar to the Social Security number but is used to identify businesses, not individuals.

Fee
A charge for services.

Fictitious Name
A legal statement filed when a person uses a name other than his or her own to operate a business.

Fictitious Name Statement
A legal filing used by a person to record a name for a proprietorship.

Finance Company
Company engaged in making loans or leases to individuals or businesses. Not a bank.

Financial Lease
A lease of property or equipment that nearly resembles that of a loan where the lessee assumes all benefits and risks including maintenance, insurance, and taxes.

Fixed Assets
Land, buildings, plant, equipment, and other assets held for normal operations of a business.

Fixed Charge
A specific charge against a named asset (i.e. debtors). Registered at Companies House.

Fixed Cost or Expenses
Overhead; those expenses that won't change, regardless of sales.

Fixed Expenses
Overhead, long-term costs that remain in place regardless of sales volume.

Fixed Fee
Occasionally a factor will proved a fixed monthly / annual administration charge, as opposed to a percentage fee.

Fixed Interest Rate
A rate that does not fluctuate with general market conditions.

Foreclosure
A legal proceeding in court to seize property given as security for a debt that is in default.

Fraud
Criminal deception. Most commonly perpetrated by clients that sell invoices to a factor with the knowledge that the debtor is not legally obligated to pay the invoice.

Free Issue Material
Any material which is supplied by the customer to the company free of charge i.e. it will not feature in the trade creditor’s ledger.

Freedom
The absence of necessity or constraint; independence; ease; facility. See Amerisource.

Front End Fees
Fees paid up front when a loan or lease is funded.

Full Recourse Agreement
A type of factoring wherein if the invoice is not collected due to the financial inability of the customer, the client assumes the loss.

Full Recourse Factoring
In this type of factoring, the factor is protected against customer non-payment. If the customer does not ultimately pay the invoice, the client is responsible for paying back the funds advanced.

Funding
Advancing money (based on the advance rate) to a client.

Funding Limit
A 'review' limit may be applied to an invoice finance facility. It may therefore be possible that this is lower than the total availability generated based on the company's outstanding debtors ledger and agreed prepayment percentage. Often arises where sales grow faster than anticipated. Formal approval by the factor should see this review limit increased.

Funding Source
An individual investor or an investment company that buys income streams.

Generally Accepted Accounting Principles (GAAP)
GAAP is the term used to describe the underlying rules basis on which financial statements are normally prepared.

Government-Based Income Streams
Cash flows paid by a government entity, either directly or through an insurance company.

Grace Period
Length of time from when monies are funded and repayment is required.

Gross Turnover Sales including VAT
Cash flows paid by a government entity, either directly or through an insurance company.

Guarantee
To take responsibility for payment of a debt if the primary person fails to do so.

Guaranteed Sales
Sales that allow the return of merchandise purchased at the customer's discretion.

Hypothecation
Borrowing funds from a lender, investing those funds in a debt instrument, and giving the lender a security interest in the debt instrument as the collateral for the loan.

Income Statements
A financial statement that displays a breakdown of sales and expenses.

Income Stream
A future payment or series of payments, or a debt that one party owes to another party. Also known as a debt instrument or cash flow instrument.

Indemnification
A promise to compensate for loss or damage sustained as a result of a stated set of circumstances.

Ineligible Balance
A proportion of the sales ledger against which the factor will not provide finance against. See also Unapproved Debt.

Insolvency
The inability to pay one’s debts when due.

Institutional Lenders
Savings and loan associations, local and regional banks, mortgage companies, finance companies, and commercial lenders.

Insurance-Based Income Streams
Cash flows stemming from insurance companies and paid to individuals or businesses.

Intangible Personal Property
Something that has value but is not a tangible asset, for example, a trademark, copyright, patent, or trade secret.

Interest
The rate paid on money that is borrowed or advanced, usually stated as a percentage rate per year.

Interest Rate
Cost of borrowing money.

Inventory Turnover
Ratio of annual sales to inventory. Demonstrates how many times the inventory of a company is sold and replaced over a 12 month period.

Investment-To-Value Ratio
A measure of how secure a creditor's position is and how likely the creditor is to recoup all of his or her money in the event of a foreclosure.

Invoice
A legal debt instrument which indicates the amount due from a customer to pay for delivered goods or services. Invoices may be traded or sold.

Invoice Batch
The notification to the factor of a number of invoices.

Invoice Date
The date an Invoice is issued.

Invoice Discounting
Instant cash upon issuing invoices without sales ledger and collection services required.

Invoice Due Date
The specified date listed on the invoice by which a Seller requests payment by the Account Debtor.

Invoice Factoring
See Factoring.

Invoice Finance
Another phrase for factoring and invoice discounting.

Invoice Finance
Lenders will purchase your Account Receivables. They may purchase them nearly as soon as you create them (contract for the payment). This speeds up your receipt of cash (not having to wait 30 days or more). Plus, many lenders will collect the invoices for you on your behalf - thus, your customers will not even know they are not dealing with you.

Joint Venture
A business entity established for a specific task, operation, or goal.

Lead
A piece of information of possible use in the search for a prospective client.

Lease Payment
The amount paid by a lessee to the lessor for the use of the leased equipment/property.

Leasing
Contract for the use of real estate, equipment, or other fixed assets for a specified time in exchange for payment.

Lending Policy
The guidelines of a financial institution in lending funds or granting leases.

Lessee
A person to whom a lease is granted; the user of the asset.

Lessor
A person who grants a lease; the owner of the asset.

Letters of Credit
A letter of credit is a guarantee of payment by a bank to a third party for a specific amount of money, if certain conditions are met.

Leverage
The ratio of debt to total assets.

Liabilities
The amount owed by a business or an individual, excluding ownership equity. There are two types of liabilities: Current and Long-term. Current are debts that must be paid within one year (such as accounts payable, dividends, notes payable, bank loans payable, taxes payable, wages and any portion of long-term debt that is due within one year). Long-term liabilities, also called funded debt, are debts that are not due until after a year's time.

Liability
A financial obligation, debt, claim or potential loss. Usually debt on terms of less than five years is called short-term liabilities, and debt for longer than five years in long-term liabilities.

Lien
A creditor's claim against property. When the debt is paid, the lien is removed. Liens may also be granted by courts to satisfy judgments.

Lien Search
A search through public records on file in both the County Clerk's and Secretary of State's offices for any claims (pledges) against the property of a business (such as their accounts receivable) or an individual. An example would be if a taxing authority has a lien against the accounts receivable of a business due to taxes owed.

Limited Liability Company
A form of business structure designed to combine the best of corporate and partnership attributes into one entity.

Line of Credit
A loan agreement which establishes the maximum amount and how often a borrower may draw funds and when those funds are to be repaid.

Liquidity
A company’s ability to meet current obligations with cash or other assets that can be quickly converted to cash. Liquidity is one of the most important characteristics of a good market. Liquidity also refers to how easily investors can convert their securities into cash and refers to a corporation's cash position, i.e. how much the value of current assets exceed current liabilities.

Loan Subordination / Postponement
The agreement by directors or associated businesses of the company not to withdraw loan money invested in the company unless agreed to by the factor. The subordination of loans can often give the factor comfort to assume these as 'quasi' capital.

Loan-To-Value Ratio
A measure of how heavily mortgaged a property is and how likely the owner is to default on his or her debts.

Lockbox
The depository account maintained by The Receivables Exchange with the Lockbox Account Bank; collection proceeds and other sums are deposited into this account.

Long Term Debt
Obligations due in 12 months or more.

Management
Individuals of a company who are in charge of insuring that the company’s assets are deployed in the most efficient and profitable manner.

Marginal Credit Customers
Consumers who may have had some slow pay problems, but generally pay their bills.

Margin Tax Rate
The tax rate applicable to the last or next unit of income.

Marketing
The process of identifying and communicating with qualified prospects.

Market Value
The price at which a ready, willing, and informed person would buy something; the price property would command in the current market.

Master Broker
Individual who has been certified and designated by the American Cash Flow Association to work with Diversified Cash Flow Specialists.

Maturity Date
Date on which a debt or lease is completed and paid in full.

Maturity Factoring
A type of non-recourse factoring. The factor takes an assignment of all of the client's book debts and administers the client's sales ledger. When monies are collected, they are sent to the client, less the factor's fee. Maturity factoring is useful to companies with extensive and complicated sales ledgers. By factoring all of their invoices in this manner, these companies receive better management of their accounts receivable by the factor than they could provide for themselves.

Maximum Extension Period
Period beyond the invoiced terms of trade at which, under a non recourse (insured) facility, the factor will settle the outstanding customer invoice. Note, not relevant where a customer dispute exists. Not all factors non recourse terms allow for this 'protracted default' cover.

Mechanics Lien
A lien created by statute for the purpose of securing priority of payment for the price or value of work performed and materials furnished in construction or repair of improvements to land and which attaches to the land as well as the improvements.

Minimum Administration Charge
A minimum charge applied to the administration charge assessed annually. Should the percentage administration charge applied to gross turnover result in the payment of charges below the minimum charge then the company will be required to pay the difference.

Minimum Period
The minimum period of an invoice finance agreement. Usually 12 months. Termination of the agreement by the company before the minimum period expires will result in the factor applying an early termination penalty charge.

Mortgage
A written instrument that creates a lien by pledging real property as security for a debt.

Negative Cash Flow
A situation where income is less than expenses. Prolonged negative cash flow can lead to the failure of a business.

Net Present Value (NPV)
Equal to the present value of the future returns, discounted at the marginal cost of capital, minus the present value of the cost of the investment.

Net Working Capital
A company’s current assets minus current liabilities. Demonstrates a company’s ability to cover fixed costs after short-term liabilities are paid.

Net Worth
The net asset position of the company. Total company assets less total company liabilities. Capital account in the case of sole traders and partnerships.

Nominal Interest Rate
The contracted, or stated, interest rate.

Non-Notification
In this type of factoring, the customer or account debtor is unaware of the factor purchasing the client invoice. They are however, directed to make payment to a lock box controlled by the factor. Any contact that the factor makes is made under the client company name.

Non-Recourse
A type of factoring where the factor assumes complete responsibility for collection of debt. If the debt is not collected due to the financial inability of the customer, the factor assumes the loss.

Note
A written promise to pay a named amount to a particular company or person by a certain date.

Notice of Pre-lien
A document notifying the owner of real property that materials or services are being furnished to his real property, putting him on notice that the one sending it will look to have a lien against the real property if those materials or services are not paid for.

Notification
Process whereby the factor lets an account debtor (client's customer) know that an invoice(s) has been purchased from client, and that the debtor is to pay the factor directly.

Offer
An offer of facility by the factor to the company. Care in that some offers can still be subject to certain conditions such as a satisfactory survey, credit approval and are therefore little more than an indication of facility. The majority though are formal offers.

Open Item Sale Ledger
The accounting for of sales by which all outstandings, invoices and credit notes are detailed, as opposed to balances only.

Operating Cycle
The length of time between a purchase of materials and collection of accounts receivable generated by the sale of the products made from the materials.

Operating Lease
A lease of property or equipment where the benefits and risks remain with the owner of the asset(s); the lessor.

Operating Line of Credit
A contract to make loans to a borrower up to a specified maximum for a specified period, usually 12 months or less.

Operating Loan
A loan advanced under an operating line of credit.

Other Fees
Any fee, other than a capital reduction or down payment, required to be paid at the close of the lease or loan.

Overhead
The cost of doing business unrelated to production or sale of goods or services. Office rent, for instance, is an overhead expense. It remains unchanged no matter how much a company sells.

Overpayment
The agreed payment by the factor to the company of funds, although above the funding limit or agreed prepayment percentage.

Owner Financing
A type of financing in which the seller of a tangible item accepts a promissory note as a portion of the purchase price. Also called Seller Financing.

Partial
Any part of a payment stream that is less than the full amount due.

Partnership
A contract between two or more people in a joint business venture who agree to pool their funds and/or talents and share in the profits and losses of the enterprise. General partners are those who are responsible for the day-to-day management of activities, whose individual acts are binding on all the partners, and who are personally responsible for the partnership's total liabilities. Limited partners are those who contribute only money and are not involved in management decisions and whose liability is limited to the amount of their investment.

Payable/(Total Revenue/365)
Accounts Receivable + inventory - Accounts Payable/(Total Revenue/365) How much cash is tied up in Accounts Receivable and Inventory less the trade credit extended to the business via Accounts Payable.

Payback
The length of time required to cover the initial outlay of cash.

Payee
Person or business that has the right to receive a payment or series of payments and is interested in selling that income stream for cash. (Also called the seller or client.)

Payor
The person, company, or government responsible for making payments on an income stream.

Personal Assets
Assets help by an individual and not a company.

Personal Guarantee
A legal obligation of an individual to takes responsibility for payment of debt if the primary person or company fails to so.

Personal Guaranty
A contractual agreement between a funding source and a seller, whereby the seller assumes personal responsibility and liability for the obligations of the income stream.

Personal Property
Any property which is not designated real property by law.

Portfolio
A group or package of income streams of the same type.

Power of Attorney
A written document by which one person, the principal, appoints another person as agent or attorney-in-fact, giving that person the authority to act on the principal's behalf to perform certain acts or duties specified in the document. The document itself serves as evidence to third parties of the agent's authority to act on behalf of the principal.

Preferential Creditor
Crown creditors. HMC&E (VAT) and Inland Revenue (PAYE)

Prepayment
Percentage advance of finance against the value of outstanding debtors.

Prepayment Penalty
A penalty for the payment of a debt before it becomes due.

Present Value (PV)
The value of a future income stream discounted back into today’s terms.

Pre-ship Invoice
A legal debt instrument which indicates the amount due from a customer to pay for goods or services which have NOT yet been delivered. Generally, factors will not purchase pre-ship invoices.

Prime Debtor
Company's largest debtor by value of the total balance outstanding. As per concentration.

Prime Rate
The interest rate that is charged by the banks to their most credit worthy customers.

Principal
The owner of a privately held business, or one of the main parties (buyer or seller) involved in a transaction.

Principal Generally
A major party to a transaction, acting as either a buyer or seller; or the owner of a privately held business.

Privately Held
Owed to a private individual or business rather than to a bank or other financial institution.

Profit & Loss Statement (P&L)
An accounting summary of revenues and expenses of a business during a specific period. This may also be known as an operating statement, income and expense statement or income statement.

Promissory Note
A written promise to pay a specified amount to a specified party over a certain period of time.

Proof of Delivery (POD)
An important document for the factor, let alone the company. Substantially assists 'collectability' (see above). Includes customer signed delivery note, carrier note, timesheet, weighbridge ticket etc.

Proprietorship
Unincorporated business owned by a single person. The individual proprietor has the right to all the profits from the business and also has responsibility for all of the firm's liabilities.

Protracted Default
Some factors non recourse (insured) terms include for payment to the company of balances outstanding having reached an agreed period (Maximum Extension Period) still unpaid. This may be in the region of 120 - 180 days from the original due date for payment of the invoice. Does not include for issues of customer dispute.

Purchase Obligation
The obligation of a Buyer to complete/consummate the purchase of a receivable over The Receivables Exchange.

Purchase Order
A contractual agreement with a supplier of goods or services that specifies payment terms, delivery dates, item identification, quantities, freight terms and all other obligations and conditions.

Purchase Order Financing
Refers to the assignment of purchase orders to a third party who then assumes the obligation of billing and collecting. Typically, this form of financing is tied to a specific transaction where the company requires cash to be able to acquire the raw materials to manufacture the goods for which it has received the purchase order. Because the third party assumes both the production risk and the collection risk, this form of financing can be costly.

Purchase Price
Sometimes referred to as the advance on the prepayment. This is the amount of money that is paid to the client by the factor for an invoice in advance of the factor receiving payment from the client's customer.

Quantity Discount
Price reductions experienced as a result of purchasing in larger volume.

Quick Ratio
The ratio of a company's liquid assets to current liabilities. Demonstrates a company’s ability to cover short-term liabilities with assets that can or will be converted to cash within 3 months or less.

Rate of Return
The gain or loss generated from an investment over a specified period of time. Rate of return is also referred to as total return and it includes the change in the value of a security plus all Interest, Dividends and capital gains distributions generated by holding that security.

Real Property
Real estate collateral that can only be perfected by a note and a Deed of Trust.

Rebate
The return of funds issued to the client by a factor from the reserve account.

Receivable
Also called Accounts Receivable; money owed to a business by customers who have bought goods or services on credit; current assets that turn into cash as customers pay their invoice for those assets.

Receivership
A remedy which may be granted by a court of law in an appropriate case, whereby a person is appointed as a receiver to possess, manage and protect money or property until the litigation involving the property is concluded.

Reconciliation
Balancing of invoice discounting notifications. Provided monthly by the company to the factor. See Control Account Summary

Recording
The placing on the public records of the county in which the property is located any instrument that affects the title of that property.

Records Search
A review of financing statements or liens on file with the Secretary of State and/or the County Clerk; discloses any existing pledge of a business accounts receivable, inventory or machinery and equipment. Similar to Lien Search.

Recourse
In this type of factoring, the risk of customer non-payment remains with the client. If the client's customer is financially unable to pay the money due under the invoice, the factor has recourse against the client for that money. The factor is protected against customer non-payment.

Recourse Period
The period that invoices are financed for before being recoursed back to the company. This is typically 90 or 120 days. In practice this is held as a reserve against the current ledger rather than a physical return of funds.

Re-Factoring Fee
An additional charge applied by some factors, under a factoring facility to the value of invoices recoursed (see above). This is usually those older than 90 or 120 days.

Repayment Terms
The length of time given a borrower to repay a debt and the frequency of such payments.

Replevin
A legal proceeding in court to seize property (other than real estate) given as security for a debt that is in default.

Repurchase Amount
The amount that the Seller is obligated to pay to repurchase a receivable from the Buyer in the event of non-payment by their Account Debtor.

Repurchase Date
The date on which the Seller is obligated to repurchase a receivable from the Buyer in the event of non-payment by their Account Debtor.

Repurchase Obligation
This refers to the Seller’s agreement and obligation to repurchase a receivable from the Buyer in the event of non-payment by their Account Debtor.

Reserve
An amount a funding source holds in its account to cover potential payment defaults. After a certain time period has passed, the funding source rebates the reserve to the client less any fees or charges for delinquency. Also called a bad debt reserve.

Reserve Account
An account established by the factor representing the portion of the face value not advanced to the client. The account amount equals the invoice face value minus the advance, the factor's fees, charge backs and administrative charges.

Reserve Release
The process of the factor releasing final monies due the client once the invoice has been totally satisfied less any applicable fees or charge-backs.

Retained Amount
The difference between the face amount of a receivable used to calculate payments (Notional Amount) and the amount advanced; the un-advanced portion of the Notional Amount.

Retained Earnings
Net profits after all business obligations are satisfied.

Retention of Title (ROT)
A clause contained in terms and conditions of sale which reserves title to the goods until payment is received. This may include the right to the proceeds of the sale of the goods.

Retrospective Rebate
A volume discount given to customers.

Revolving Credit
A Line of Credit in which funds can be drawn down, repaid and drawn down again.

Risk-Sharing Factoring
A hybrid form of factoring which combines non-recourse and recourse factoring.

Sale and Leaseback
An agreement in which the owner of a property sells that property to a person or institution and then leases it back again for an agreed period and rental.

Salvage Value
The value of a capital asset at end of a specified period.

Satisfaction
The discharge of an obligation by paying a party what is due (i.e., the satisfaction of an IRS lien or the satisfaction of a mortgage).

Schedule of Accounts
A Bill of Sale generated by the factor's client that lists all of the accounts (invoices) the client wants to sell to the factor at that time.

Scheduled Order
An order received from a customer specifying delivery of various quantities over a given period.

Seasoned
Seasoning relates to the length of time payments have been made on an income stream. An income stream is seasoned if many payments have been received in a timely manner. Buyers will have their own ideas as to how many payments make for a seasoned income stream, but a year's worth is fairly well-seasoned. In that time, the payor will have established his/her financial ability to make the payments on a consistent basis.

Seasoning
The length of time payments have been made on a note or other debt instrument.

Secondary Market
The marketplace where individuals and businesses can sell privately held income streams to funding sources for cash.

Securitization
The bundling and resale of debt instruments to investors; permitted only for parties licensed and regulated by the SEC.

Security
Property given or pledged to ensure the repayment of a debt by a borrower.

Security Interest
An interest in property, other than real estate, that is given as security for a debt or other obligation. A security interest is created by execution of a security agreement and one or more financing statements under the Uniform Commercial Code (UCC-1's) that are then placed on record with the Secretary of State and/or with the county recording office where the property is located.

Self Billing
An invoice raised by a customer, for payment by the customer to their supplier.

Seller
The person or company that is holding a debt instrument and wants to sell it.

Seller Remittance Payment
The amount, if any, that a Seller may receive out of the Retained Amount.

Sellers
Businesses that have been approved by The Receivables Exchange to post receivables for sale to Buyers.

Servicing
The collection of payments of interest and principal, and trust fund items such as fire insurance, taxes, etc., on a note by the borrower in accordance with the terms of the note. Servicing by the lender also consists of operational procedures covering accounting, bookkeeping, insurance, tax records, loan payment follow-up, delinquent loan follow-up and loan analysis.

Settlement Discount
A rebate allowed against the gross value of an invoice for settlement within a given period.

Shareholder
Owner of one or more shares of stock in a corporation and or a privately-held business.

Sole Proprietorship
A business owned and operated by an individual.

Special Retention
An amount of the sales ledger set aside for which the factor will not permit finance against. Unlike an unapproved balance this does not relate to a specific sales ledger balance, but another reason specified by the factor.

Stage Payment
The payment for a particular order in stages. i.e. 30% on order, 60% on delivery 10% after 30 days.

Subordinated Debt
A debt that is payable only after a more senior debt has been paid.

Subordination
The act of a creditor acknowledging in writing that the debt due him by a debtor shall be inferior to the debt due another creditor by the same debtor.

Supplier Credit
An agreement to delay receipt of payment of invoices for a set period.

Supplier Discount
An amount deducted from an invoice by a supplier in exchange for quick payment.

Survey
An audit is very often complete by the factor of the company's systems and debtors before approving the provision and terms of an invoice finance facility. Usually completed at the premises of the company.

Tail
The payment stream and/or balloon payment of an income stream subsequent to another party's right and interest in the income stream. Usually the back half of the payment stream when another party has purchased the front half.

Take On
The commencement of the invoice finance facility.

Take on Balance
The sales ledger balance at the commencement of the facility against which the factor will provide finance.

Tangible Personal Property
Personal property other than real estate, such as cars, boats, or other assets.

Term
The period of duration of an invoice, trade acceptance, time draft, bill of exchange, bond or loan/factoring agreement. The time allowed for payment of invoices.

Termination Period
Period of notice required to be given by the company to the factor as notice of their intent to cease their invoice finance agreement. Usually subject to an initial minimum period of the agreement.

Term Loan
A loan that is made to an individual or company over a long period of time, typically 12 months or more.

Time Value of Money
Concept that addresses the way the value of money changes over a period of time.

Title
The legal owner of property.

Title Commitment
A commitment on the part of the insurer, once a title search has been conducted, to provide the proposed insured with a title insurance policy upon closing.

Title Insurance
Title insurance can benefit either the payor or the payee. Should the beneficiary suffer any damages due to clouded or false title to real estate, title insurance recompenses the damaged party to the extent of the damages.

Title Policy
An insurance policy that insures a party against loss due to a defective title.

Trade Credit
Credit granted by a supplier to a customer to finance the customer’s purchase of goods or services from the supplier.

Trade Creditor
A supplier to the company with who balances are outstanding under credit payment terms for settlement of outstanding invoices.

Trade Debtor
A business customer of the company with who balances are outstanding under credit payment terms for settlement of outstanding invoices.

Trade Discount
A deduction from the list price of goods provided by a business in return for payment within a specified time frame.

Trade Receivables
Invoices for goods furnished or services rendered by one business to another business.

Transfer Charge
The charge made for drawing funds from your invoice finance facility to the company's trading account.

Trial Balance Printout
A spreadsheet that lists all loans in a portfolio and their payment schedule. Usually required for a portfolio transaction.

Trust Account
The invoice finance 'bank' account

UCC-1
A Financing Statement (Form UCC1) is filed to perfect a security interest in named collateral and establishes priority in case of debtor default or bankruptcy. UCC (Universal Commercial Code) refers to the collection of laws dealing with commercial business.

UCC-2
The document that is filed with the Secretary of State and/or the County Clerk's office(s) as evidence of an assignment, release or change in the UCC-1. In the case of factoring, a UCC-3 is filed to terminate a UCC- 1 when all outstanding invoices are paid and the relationship between the client and the factor is severed. Also called "UCC Statement With Respect To Change."

UCC-3
The document that is filed with the Secretary of State and/or the County Clerk's office(s) as evidence of an assignment, change or release of the UCC-1. In the case of factoring, a UCC-3 is filed to terminate a UCC- 1 when all outstanding invoices are paid and the relationship between the client and the factor is ended.

Unapproved Debt
Trade debt that is not approved for funding by the factor. i.e. the prepayment is not permitted against this element of debt.

Unencumbered
Property free and clear of all liens.

Uniform Commercial Code
A set of standard rules, adopted by states in US, that governs commercial transactions. The Uniform Commercial Code Bureau files and maintains record on financial obligations (including IRS liens) incurred by individuals (in business as a sole proprietor), business entities and corporations.

Unprocessed Balances
The total value of any invoice notifications still waiting to be processed by the factor.

Unseasoned
A lease or note that has had few, if any, payments made.

Unsecured Liabilities
Debts that do not provide for some form of collateral, such as Accounts Payable.

Valuation
The act or process of determining the value or price of something.

Value Date
The date receipts are considered accepted by the factor for the purposes of calculating interest charges.

Verification
A step during the due diligence process in which a factor confirms the validity of an invoice with the client's customer.

Volume
The basic measure of output generated from a particular business activity.

Waiver of Book Debts
A factor will require the agreement of any existing charge holder (i.e. company's bankers) to waive their interest in respect of debtors.

Warranty
An undertaking by the client that a condition of the Accounts Receivable is as stated or will be exactly fulfilled.

Working Capital
The amount of money that a business has available to conduct its day-to-day activities. It includes monies that that the owner or investors have invested in the company, retained earnings and supplier credit. A business with limited working capital benefits from factoring by eliminating the time that invoices are outstanding (see Financing Spreadsheet Tool).

Working Capital
Also referred to as net current assets; working capital is current assets minus current liabilities. It measures how much a company has in liquid assets available to grow its business.

Working Capital Management
Also known as net working capital; represents operating liquidity available to a business; calculated as current assets minus current liabilities.

Work In Progress
Work undertaken for a customer on an ongoing basis where invoices are raised for measured or estimated work completed to-date.

Yield
The return on an investor's capital investment presented as a ratio of income to the total cost over a specified period of time.