Factoring Glossary of Terms / Accounts Receivable

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accounts receivables

Factoring (Invoice Funding) Terms

account definition
account definition, Account is a collection of claims or invoices against a particular customer for goods or services delivered. - Factoring terms / Accounts Receivable

account debtor definition
account debtor definition, Account Debtor is a 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. - Factoring terms / Accounts Receivable

accounts payable definition
accounts payable definition, Accounts Payable is 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. - Factoring terms / Accounts Receivable

accounts receivable aging schedule definition
accounts receivable aging schedule definition, Accounts Receivable Aging Schedule is 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. - Factoring terms / Accounts Receivable

accounts receivable financing definition
accounts receivable financing definition, Accounts Receivable Financing is a form of financing which uses accounts receivable as collateral for a loan. Accounts receivable financing is different than factoring in that the party providing the financing does not own the invoice and is not responsible for collecting the debt. - Factoring terms / Accounts Receivable

accounts receivables definition
accounts receivables definition, Accounts Receivable is the money that is owed to a company for goods and services it has provided to customers on credit. The accounts receivable amount is an asset to the company. Accounts receivable in the books of company goes as accounts payable in the books of customers. - Factoring terms / Accounts Receivable

acknowledgment form definition
acknowledgment form definition, Acknowledgment Form is a 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. - Factoring terms / Accounts Receivable

advance definition
advance definition, Advance is the percentage of an invoice's face value which a factor pays upon its purchase. - Factoring terms / Accounts Receivable

asset based lending definition
asset based lending definition, Asset based Lending is a form of lending where the factor uses collateral, such as equipment or inventory, as security against the loan. - Factoring terms / Accounts Receivable

assets definition
assets definition, Asset is anything having commercial or exchange value that is owned by a business, government, institution, or individual. Assets are any possessions that have value in an exchange. The primary classifications of assets are: current assets, long-term assets, prepaid and deferred assets, and intangible assets. - Factoring terms / Accounts Receivable

assignment definition
assignment definition, Assignment is a transfer of ownership or interest in a payment obligation between two or more parties. - Factoring terms / Accounts Receivable

authorized signatory definition
authorized signatory definition, Authorized Signatory is an individual who is authorized to execute a binding document on behalf of a corporation, partnership or other legal entity. - Factoring terms / Accounts Receivable

balance sheet definition
balance sheet definition, Balance Sheet is 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. - Factoring terms / Accounts Receivable

bank overdraft definition
bank overdraft definition, Bank Overdraft is an alternative to factoring with no credit management service. - Factoring terms / Accounts Receivable

bankruptcy definition
bankruptcy definition, 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. - Factoring terms / Accounts Receivable

bill of exchange definition
bill of exchange definition, Bill of Exchange is 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. - Factoring terms / Accounts Receivable

bill of lading definition
bill of lading definition, Bill of Lading is a shipping document providing instructions to the freight forwarder or shipper. Bill of lading also indicates who the seller and the buyer are. - Factoring terms / Accounts Receivable

bill of sale definition
bill of sale definition, Bill of Sale is a document used to transfer title of goods from the seller to the buyer. - Factoring terms / Accounts Receivable

blanket assignment definition
blanket assignment definition, Blanket Assignment is a legal transfer of ownership of all accounts receivable, both present and future as collateral for funding. - Factoring terms / Accounts Receivable

break even point definition
break even point definition, Break-Even Point is the level of sales whereby you are neither making a profit or 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. - Factoring terms / Accounts Receivable

broker definition
broker definition, Broker is 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. - Factoring terms / Accounts Receivable

capital net worth definition
capital net worth definition, Capital Net Worth is 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. - Factoring terms / Accounts Receivable

cash flow definition
cash flow definition, Cash flow is the measurement of cash a company gained or lost during an accounting period and adjusted for any previous accounting for accruals and other non-cash transactions. 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. - Factoring terms / Accounts Receivable

chapter 1 definition
chapter 1 definition, Chapter 1 affords businesses an opportunity to reorganize by restructuring debt and negotiating payment schedules. - Factoring terms / Accounts Receivable

chapter 11 definition
chapter 11 definition, Chapter 11 is the part of the U.S. Bankruptcy Code that contains the provisions for Court-supervised reorganization of debtor companies. In a Chapter 11, the debtor proposes a plan, which is then voted on by the creditors. - Factoring terms / Accounts Receivable

collateral definition
collateral definition, Collateral is 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. - Factoring terms / Accounts Receivable

commercial credit insurance definition
commercial credit insurance definition, Commercial Credit Insurance is insurance against large losses from the uncollectability of accounts receivable. - Factoring terms / Accounts Receivable

concentration definition
concentration definition, Concentration is the amount of one client's accounts receivable due from a single customer. A large concentration for a single customer is considered high risk. - Factoring terms / Accounts Receivable

confidential invoice discounting definition
confidential invoice discounting definition, 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. - Factoring terms / Accounts Receivable

credit analysis definition
credit analysis definition, Credit Analysis is 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. - Factoring terms / Accounts Receivable

credit insurance definition
credit insurance definition, Credit Insurance if your customer fails to pay the invoice. You receive payments for your bad debts up to pre determined limits. - Factoring terms / Accounts Receivable

dba doing business as definition
"dba doing business as definition, DBA is also known as an "assumed

DBT definition
DBT definition, DBT or days beyond terms indicates how many days past the due date an invoice is late. - Factoring terms / Accounts Receivable

delivery evidence definition
delivery evidence definition, Delivery Evidence is a document that proves delivery and invoicing of a shipment. - Factoring terms / Accounts Receivable

direct mail definition
direct mail definition, Direct Mail is a term used for mail sent to large numbers of potential customers advertising a product or service and soliciting orders. - Factoring terms / Accounts Receivable

discount factoring definition
discount factoring definition, Discount Factoring refers to an arrangement whereby a factor purchases an account(s) receivable from a business 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. - Factoring terms / Accounts Receivable

discount fee definition
discount fee definition, Discount Fee is the amount earned by a factor on each invoice purchased. Discount fee 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. - Factoring terms / Accounts Receivable

discount rate definition
discount rate definition, Discount Rate is the percentage of the face value of an invoice that a factor holds as its fee. - Factoring terms / Accounts Receivable

due diligence definition
due diligence definition, Due Diligence is the verification of information and its documentation given to a factor in order to facilitate a decision as to whether or not a particular invoice should be purchased. Factors always want to take as little risk as possible and want to be assured that the money they advance would be paid back. - Factoring terms / Accounts Receivable

face amount or face value definition

face amount or face value definition, Face Amount or Face Value is the total amount of an invoice. Face value 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. - Factoring terms / Accounts Receivable

factor definition
factor definition, Factor, as a noun is a company engaged in the buying of accounts receivable. Factor, as a verb is the act of buying or selling accounts receivable at a discount. - Factoring terms / Accounts Receivable

factoring definition
factoring definition, Factoring is the process of purchasing of debts owed, or accounts receivable in exchange for immediate payment at a discount. - Factoring terms / Accounts Receivable

guaranteed sales definition
guaranteed sales definition, Guaranteed Sales is a term used for sales that allow the return of merchandise purchased at the customer's discretion. - Factoring terms / Accounts Receivable

indemnification definition
indemnification definition, Indemnification is a promise to compensate for loss or damage sustained as a result of a stated set of circumstances. - Factoring terms / Accounts Receivable

invoice definition
invoice definition, Invoice is a legal debt instrument which indicates the amount due from a customer to pay for delivered goods orservices. Invoices may be traded or sold. - Factoring terms / Accounts Receivable

invoice discounting definition
invoice discounting definition, Invoice Discounting is instant cash upon issuing invoices without sales ledger and collection services required - Factoring terms / Accounts Receivable

invoice finance definition
invoice finance definition, Invoice Finance is another phrase for factoring and invoice discounting. - Factoring terms / Accounts Receivable

liabilities definition
liabilities definition, Liability is 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. - Factoring terms / Accounts Receivable

lien definition
lien definition, Lien is 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. - Factoring terms / Accounts Receivable

lien search definition
lien search definition, Lien Search refers to 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. - Factoring terms / Accounts Receivable

line of credit definition
line of credit definition, Line of Credit is the amount of credit that may be extended to a borrower by a lender. This type of arrangement gives a borrower more flexibility in planning for operating expenses. - Factoring terms / Accounts Receivable

liquidity definition
liquidity definition, Liquidity is 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. - Factoring terms / Accounts Receivable

mechanics lien definition
mechanics lien definition, 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. - Factoring terms / Accounts Receivable

negative cash flow definition
negative cash flow definition, Negative Cash Flow refers to a situation where income is less than expenses. Prolonged negative cash flow can lead to the failure of a business. - Factoring terms / Accounts Receivable

non notification definition
non notification definition, Non-Notification is an aspect of confidential factoring where the customers are not notified of the client's arrangement with the factor. - Factoring terms / Accounts Receivable

non recourse factoring definition
non recourse factoring definition, Non-Recourse is 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. - Factoring terms / Accounts Receivable

note definition
note definition, Note is a written promise to pay a named amount to a particular company or business by a certain date. - Factoring terms / Accounts Receivable

notification definition
notification definition, Notification is a process whereby the factor lets an account debtor know that an invoice has been purchased from the client and that the debtor is to pay the factor directly. - Factoring terms / Accounts Receivable

personal guarantee definition
personal guarantee definition, Personal Guarantee is an agreement in which a principal of a corporation assumes personal liability for the obligations of the corporation. - Factoring terms / Accounts Receivable

pre ship invoice definition
pre ship invoice definition, Pre-ship Invoice refers to 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 would not purchase pre-ship invoices. - Factoring terms / Accounts Receivable

principal definition
principal definition, Principal is a term used for the owner of a privately held business or one of the main parties (buyer or seller) involved in a transaction. - Factoring terms / Accounts Receivable

principal generally definition
principal generally definition, Principal Generally is a major party to a transaction, acting as either a buyer or seller or the owner of a privately held business. - Factoring terms / Accounts Receivable

purchase order definition
purchase order definition, Purchase order is 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. - Factoring terms / Accounts Receivable

quantity discounts definition
quantity discounts definition, Quantity Discounts are discounts that are offered to encourage customers to buy in larger amounts. - Factoring terms / Accounts Receivable

rate of return definition
rate of return definition, Rate of Return is 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. - Factoring terms / Accounts Receivable

rebate definition
rebate definition, Rebate is the return of funds issued to the client by a factor from the reserve account. - Factoring terms / Accounts Receivable

recourse factoring definition
recourse factoring definition, Recourse is a form of factoring where the client is liable for payment in the event the customer does not pay. - Factoring terms / Accounts Receivable

reserve account definition
reserve account definition, Reserve Account is 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. - Factoring terms / Accounts Receivable

schedule of accounts definition
schedule of accounts definition, Schedule of Accounts is a report given by the client to the factor listing information about the account of each of the client's customers. - Factoring terms / Accounts Receivable

security definition
security definition, Security is the property given or pledged to ensure the repayment of a debt by a borrower. - Factoring terms / Accounts Receivable

trade discount definition
trade discount definition, Trade Discount is a deduction from the list price of goods provided by a business in return for payment within a specified time frame. - Factoring terms / Accounts Receivable

ucc 1 definition
ucc 1 definition, UCC-1 is the document filed with the Secretary of State and/or the County Clerk's office(s) to perfect a factor's lien on a clients' assets. UCC-1 is also called UCC Financing Statement. - Factoring terms / Accounts Receivable

ucc 3 definition
ucc 3 definition, UCC-3 is a 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. UCC-3 is also called UCC Statement With Respect To Change. - Factoring terms / Accounts Receivable

uniform commercial code definition
uniform commercial code definition, Uniform Commercial Code is 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. - Factoring terms / Accounts Receivable

verification definition
verification definition, Verification is a step during the due diligence process in which a factor confirms the validity of an invoice with the customer. - Factoring terms / Accounts Receivable

yield definition
yield definition, Yield is the return on an investor's capital investment presented as a ratio of income to the total cost over a specified period of time. - Factoring terms / Accounts Receivable


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Factoring / Invoice Funding Glossary ©2004 HJ Ventures International, Inc.