Glossary of Terms
Glossary
Approved debts - the invoices that a lender is willing to lend against. This will exclude things such as disputed debts, retail sales and customers with a ban of assignment clause in their terms of sale.
Asset based lending - An advance against a mixture of business assets; debtors, stock, plant and machinery, land and buildings
Assignment - the legal process whereby the factoring company gains ownership of the money due from their clients' invoice.
Ban of assignment - where a customer refuses to allow a client to assign an invoice to a Factor
Factoring - An advance against unpaid sales invoices and full or partial credit management
High Involvement/concentration - Sometimes a customer makes up the lions share of a sales ledger. This customer is then said to be highly concentrated, and can lead to restricted funding depending on their creditworthiness, and the attitude of the lender
Invoice Discounting - An advance against unpaid sales invoices without any intervention in credit management. Usually confidential in nature.
IP (initial percentage) - The amount advanced against each invoice, typically up to 90%.
Non-recourse factoring - An element of credit insurance is included within the agreement protecting clients from bad debts and often protracted default.
Recourse factoring - The lender will fund invoices for a set period, typically 90-120 days. If the debt is not repaid at this point, any advance against that invoice will be withdrawn from the client.
Trade finance - Finance to help purchase goods from suppliers. Once a confirmed order from a creditworthy buyer exists, the trade finance company funds the required purchase from the supplier
