Factoring Learning center
be familiar with the Terminology of the Factoring business.
account (ac·count) \uh-kount\ - a statement of financial transactions having occurred during a fiscal period, along with the concluding balance
accounts payable (ac·counts pay·a·ble) \uh-kounts pā-ə-bəl\ - a company’s outstanding balance due to a supplier following provision of goods and services by that supplier
account receivable (ac·count re·ceiv·a·ble) \uh-kount ri-sē-və-bəl\ - the remaining amount of money owed by a debtor on an existing account
accounts receivable (ac·counts re·ceiv·a·ble) \uh-kounts ri-sē-və-bəl\ - a series of account invoices reflecting the total amount of money due to a company by the customers to whom it has provided goods and services
accounts receivable financing (ac·counts re·ceiv·a·ble fi·nanc·ing) \uh-kounts ri-sē-və-bəl \ - the acquisition of a company’s accounts receivables or invoices at a discounted rate by a factor who in turn provides an immediate cash advance that typically occurs as a wire transfer; also referred to as factoring
accounts receivable aging report (ac·counts re·ceiv·a·ble ag·ing re·port) \uh-kounts ri-sē-və-bəl áyjing ri-port\ - a periodic financial report generated to demonstrate the length of time invoices for each of a company’s customers have been outstanding
advance rate (ad·vance rate) \əd-vánss rayt\ - the maximum amount of money a factor will provide a client, representing a percentage of the total face value of an invoice or of some collateral
articles of incorporation (ar·ti·cles of in·cor·po·ra·tion) - a document that, once filed with the appropriate state authority, leads to the creation of a corporation and sets forth the primary rules governing the management of that corporation; also referred to as the Certificate of Incorporation or Corporate Charter
asset (as·set) \á-sèt\ - any item of economic value that is owned by an individual or business, including both tangible and intangible items such as cash, securities, real estate, accounts receivable, office equipment, inventory, and copyrights or trademarks
assignability (as·sign·a·bil·i·ty) \ə-ˈsī-nə-ˈbi-lə-tē\ - the ability to transfer an asset from one individual or company to another
assignee (as·sign·ee) \ə s n\ - the individual or organization obtaining rights associated with an asset that was originally held by another party, the assignor
assignment (as·sign·ment) \ə-ˈsīn-mənt\ - a process involving the transfer of rights or property held by one party, the assignor, to another party, the assignee
assignor (as·sign·or) \a- sī -ˈnȯr\ - the individual or organization who transfers to another party, the assignee, the rights associated with an asset, thereby giving up access to this asset
bad debt (bad debt) \bad det\ - any portion of receivables that can no longer be collected from accounts receivable
balance sheet (bal·ance sheet) \ba-lən(t)s shēt\ - a report providing detailed information about the current financial situation of a company, including all of its assets, liabilities and equity at a particular point in time
bankruptcy (bank·rupt·cy) \bángk-rùptsee\ - a legal declaration by an individual or organization regarding its inability to pay off the debts owed to a creditor; also referred to as insolvency
beneficiary (ben·e·fi·ci·ar·y) \bènnə-físhee-èrree\ - a person or other legal entity receiving money or other benefits from a benefactor
bill of lading (bill of lad·ing) \bil uv láyding\ - a document issued by a company’s shipping department, or carrier, listing the goods being shipped and specifying the terms involved in their transport; also referred to as a BOL
bill of sale (bill of sale) \bil uv sayl\ - a legal document acknowledging that the ownership of certain goods has been transferred from one party, the seller, to another party, the purchaser
cash flow (cash flow) \kash flō\ - the movement of money received by a company in the form of income and spent by a company in the form of expenditures during a certain period of time
cash flow instrument (cash flow in·stru·ment) \kash flō in(t)-strə-mənt\ - a debt instrument representing a future stream of periodic payments; also referred to as income stream
cash flow transaction (cash flow trans·ac·tion) \kash flō tran-zak-shən\ - a transaction that results when a factor disburses money to an individual or company in exchange for an income stream
chattel (chat·tel) \chátt'l\ - any item of tangible movable or immovable property, excluding real estate and additional items connected to real property, such as land, buildings and attached fixtures
client (cli·ent) \kl ənt\ - the individual or company to whom services are provided by a funding source
collateral (col·lat·er·al) \kə-ˈla-t(ə-)rəl\ - assets pledged by a borrower to be used as security against a debt that are then subject to forfeiture if the borrower defaults and the debt cannot be paid off; also referred to as security
collateral-based income streams (col·lat·er·al based in·come stream) \kə-ˈla-t(ə)-rəl bāst in-kəm strēm\ - cash flow instruments that are protected by collateral
collectibility (col·lect·ibil·i·ty) - the ability of a factor to accumulate future income stream payments after they are initially acquired
corporation (cor·po·ra·tion) \kȯr-pə-ˈrā-shən\ - a group recognized by law as a single entity with its own rights and duties, separate from those of its individual members
credit insurance (cred·it in·sur·ance) \kréddit in-shrənss\ - an insurance policy associated with a specific line of credit that restores some or all of any money owed if certain things, such as death, disability or unemployment, were to happen to the policy holder
creditworthiness (cred·it·wor·thi·ness) \kréddit-wùree-ness\ - the extent to which a debtor is considered to be financially reliable enough to warrant a designated credit limit for the purpose of advancing funds against their outstanding invoices
creditor (cred·i·tor) \krédditər\ - an individual or company to whom funds are to be paid by a debtor
customer (cus·tom·er) \kústəmər\ - an individual or company (debtor) buying the goods and services provided by another individual or company (vendor)
debt instrument (debt in·stru·ment) \det ínstrəmənt\ - a debt owed as future payment to another individual or company; also referred to as income stream or cash flow instrument
debtor (debt·or) \de-tər\ - an individual or organization that has borrowed money from a creditor and owes that amount back to the creditor
default (de·fault) \di-folt\ - failure to meet one’s legal financial obligations according to the debt contract established between debtor and creditor; to be distinguished from bankruptcy or insolvency
discount fee (dis·count fee) \díss-kownt fee\ - the amount of interest collected by a factor after providing a cash advance on an invoice; also referred to as factoring rate
doing business as (d/b/a) - a formal statement that is filed to indicate when an individual or company is conducting business under a name other than his or her own
due diligence (due dil·i·gence) \doo dílləjənss\ - the act of performing extensive research and investigation prior to conducting a business transaction with a company or client, which may include credit checks, appraisals, UCC searches, lien searches or on-site visits to the company or client
equity (eq·ui·ty) \e-kwə-tē\ - the interest an owner demonstrates in the assets of a company after deducting all of the company’s liabilities, as appearing on the company’s balance sheet
escrow (es·crow) \es-krō\ - a deed, bond, money or piece of property granted to an individual, but held in trust by a third party until a specific condition in a contract has been fulfilled
face value (face val·ue) \fayss váll-yoo\ - the apparent value of an invoice as represented by the total current principal balance of the invoice
factor (fac·tor) \fak-tər\ - a funding source that buys the accounts receivable of another business at a discounted price and subsequently provides that business with an immediate source of cash, typically in the form of a wire transfer
factoring (fac·tor·ing) \fáktəring\ - the purchasing of a company’s accounts receivables or invoices at a discounted rate by a factor who adopts the associated risk of loss by the company; also referred to as accounts receivable financing
factoring rate (fac·tor·ing rate) \fak-t(ə-)riŋ rāt\ - the percentage of an invoice amount charged by a factor for funding the invoice; also referred to as discount fee
financing (fi·nanc·ing) \fī-nan(t)s-iŋ\ - the management and provision of funds for one’s financial affairs, which generally involves the ability to balance income and expenditure
financing accounts receivables (fi·nanc·ing ac·counts re·ceiv·a·ble) - see ‘factoring’ or ‘accounts receivable financing’
financing statement (fi·nanc·ing state·ment) \fī-nan(t)s-iŋ stāt-mənt\ - a document issued in accordance with the Uniform Commercial Code (UCC) and filed with local state authorities to give notice that a creditor has filed a claim against the individual or company named on the form as the debtor
foreclosure (fore·clo·sure) \fawr-klṓər\ - a legal process during which a bank or other secured creditor confiscates a parcel of property serving as collateral after a debtor defaults on a payment
funding source (fund·ing source) - an individual investor or investment company that buys income streams
government-based income (gov·ern·ment based in·come) \gə-vər(n)-mənt bāst in-kəm\ - money disbursed by a government entity, either directly or indirectly through a sub-contractor
income stream (in·come stream) \in-kəm strēm\ - the flow of money generated by a business on a regular basis
insolvency (in·sol·ven·cy) - see ‘bankruptcy’
institutional lenders (in·sti·tu·tion·al lend·ers) \ìnsti tsh'nal len-dərs\ - private, public or institutional organizations engaged in the business of controlling assets and making funds available for others to borrow, among which are banks, insurance companies and investment companies
intangible personal property (in·tan·gi·ble per·son·al prop·er·ty) \in-tánjəb'l púrssən'l próppərtee\ - any unquantifiable asset or piece of personal property over which an individual or company can have ownership and of which the individual or company can transfer ownership to another individual or company; also referred to as incorporeal property, including copyright, trademarks or patents, and excluding tangible assets
investment-to-value ratio (in·vest·ment to val·ue ra·tio) \in véstmənt to vállyoo ráyshi-ō\ - the extent to which a creditor is secure in his or her position and the likelihood of the creditor’s being able to recover all of his or her money in the instance of a foreclosure
invoice (in·voice) \ín-vòyss\ - a written record of the amount charged for goods and services provided along with the terms of sale that is sent to a customer as a request for payment
joint venture (joint ven·ture) \joynt vénchər\ - a business endeavor jointly undertaken by two or more parties for the purpose of executing a particular task or project and who agree to share in the profits and losses of the company
leverage (lev·er·age) \lévvərij\ - the proportion of a company’s debt capital to the value of its total assets
Limited Liability Company (LLC) (lim·it·ed li·a·bil·i·ty com·pa·ny) \límmitəd l ə bíllətee\ - a type of company with a more flexible level of partnership and whose owners and managers enjoy the limited liability and tax benefits of a Subchapter S corporation, while avoiding some of the restrictions found within these corporations
loan-to-value ratio (loan to val·ue ra·tio) - the proportion of an asset that is financed by a loan being used to purchase the asset, which evaluates how likely a borrower is to default on his or her debts; also referred to as LTV ratio
notification (no·ti·fi·ca·tion) \ntəfi káysh'n\ - the manner in which a factor notifies a debtor that all proceeds due should, by law, be paid directly to the factor
partial payment (par·tial pay·ment) - any part of an invoice paid that represents less than the entire amount due on the invoice
partnership (part·ner·ship) \prtnər shìp\ - a relationship established between two or more entities who are conducting business for mutual benefit and who share the profits and losses incurred
payee (pay·ee) \pay-\ - an individual or company that receives a payment or series of payments in the form of cash, check, money order, wire transfer or promissory note following receipt of an invoice, in exchange for the provision of goods and services; also referred to as seller or client
payer (pay·er) \páy ər\ - an individual or company responsible for paying an invoice after receipt of goods and services
personal guarantee (per·son·al guar·an·tee) \púrssən'l gàrrən t\ - a contractual agreement between a factor and its clients, whereby the client assumes personal responsibility for the debts on which his or her company defaults
portfolio (port·fo·li·o) \pawrt fṓlee \ - a collection of investments all owned by the same individual or company, including stocks, bonds, and mutual funds
profit and loss statement (prof·it and loss state·ment) \próffit and lawss stáytmənt\ - a financial statement detailing earnings, expenses and net profit incurred by a company over a given period of time, usually quarterly or annually; also referred to as P & L, income statement or earnings report
promissory note (prom·is·so·ry note) \prómmi-sàwree nōt\ - a written agreement promising payment of a specified amount of money to a particular individual or party by a certain deadline
purchase and sale agreement (pur·chase and sale a·gree·ment) - a contractual agreement between a factor and its client that details the legal terms and conditions of the financing relationship and the principles by which both parties must abide
replevin (re·plev·in) \ri plévvin\ - a court action taken by an individual or company to recover possession of collateral on a debt that is in default
reserve (re·serve) \ri zúrv\ - an amount of capital or revenue retained in its account by a funding source to cover any potential payment defaults that occur in the future
satisfaction of debt (sat·is·fac·tion) \sàttəss fáksh'n\ - a document issued by a lender upon complete repayment of a debt
securitization (se·cu·ri·ti·za·tion) \sə kyrəti záysh'n\ - a financing process involving the consolidation and resale of a debt instrument to an investor in the form of a negotiable security
security interest (se·cu·ri·ty in·ter·est) \sə-kyrətee íntrəst\ - the right of a creditor to procure all or part of the personal property of a debtor that was offered as collateral for a debt or other obligation
seller (sell·er) \séllər\ - an individual or company looking to sell a debt instrument held in possession by that individual or company
sign off (sign off) \sīn awf\ - to legally acknowledge that money is due by a debtor on an invoice
sole proprietorship (sole pro·prie·tor·ship) \sōl prə-pr-ətər-shìp\ - a type of business that is owned and operated by an individual, in which he or she is considered a single entity for tax purposes and solely liable for any debts incurred
subordination (sub·or·di·na·tion) \sə-bàwrd'n-áysh'n\ - the process by which a debt due to a creditor by a debtor is acknowledged as being inferior in relation to the debt owed to another creditor by that same debtor
tangible property (tan·gi·ble prop·er·ty) \tánjəb'l próppərtee\ - any quantifiable asset or piece of personal property over which an individual or company can have ownership and of which the individual or company can transfer ownership to another individual or company, including such physical objects as cars and boats
trial balance (tri·al bal·ance) - a statement created to ensure that the debits and credits in a bookkeeping ledger are equal at a specified period of time
Uniform Commercial Code (UCC) (U·ni·form Com·mer·cial Code) - a set of standardized laws regulating commercial transactions in the United States, especially those involving one’s rights to collateral
verification (ver·i·fi·ca·tion) \vèrrəfi-káysh'n\ - the process of confirming the truth or correctness of the amount of a customer’s invoice.
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