Factoring Terms

ABCDFINPRSUV

Account
A collection of claims or invoices against a particular customer for goods or services delivered.
Account Debtor
The person, business or organization responsible for paying an invoice.
Accounts Receivables
A commercial debt due for repayment usually in 30 – 90 days.
Advance
A percentage of an invoice advanced to the client by a factor.
Assignment of Account
The client’s right to an account is assigned to a factor.
Authorized Signatory
An individual who is authorized to execute a binding document on behalf of a corporation, partnership or other legal entity.


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.


Cash Flow
The difference between cash received and cash paid out.
Clients
The individual or company that sells or assigns 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.
Concentration
The amount of one client’s accounts receivable due from a single customer. A large concentration for a single customer is considered high risk.


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.
Debtor
A person or party which owes payment to a creditor.
Delivery Evidence
A document that proves delivery and invoicing of a shipment.


Factoring Fee
The amount earned by a factor on each invoice advanced upon. 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 factoring agreement.
Face Amount or Face Value
The total dollar amount of an invoice.
Factoring
The process of advancing on commercial accounts receivable (invoices) from a business for a fee.
Funding
Advancing money (based on the advance rate) to a client.


Invoice
A legal debt instrument which indicates the amount due from a customer to pay for delivered goods or services.
Invoice Aging Report
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.


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


Personal Guarantee
An agreement in which a principal of a corporation assumes personal liability for the obligations of the corporation.
Purchase Order
A document or form used by a customer to issue an order for goods or services.


Recourse
A form of factoring where the client is liable for payment in the event the customer does not pay.
Reserve Account
An account established by the factor to track funds owed to a client as factored invoices are paid. The account amount equals the invoice face value minus the advance, the factor’s fees, charge backs and administrative charges.


Schedule of Accounts
A summary report give by the client to the factor when submitting invoices to be factored.


UCC-1
The document filed with the Secretary of State and/or the County Clerk’s office(s) to perfect a factor’s lien on a client’s assets (accounts receivable).
Uniform Commercial Code
The State Code which regulates the transfer of property.


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