Glossary
ABL – Asset Based Lending.
Accounts Receivables – these are the monies owed by the customers you have raised invoices to on credit terms.
Advance – this is the percentage that a factoring company will prepay against an invoice.
Asset Based Lending – this is where a lender uses a mixture of assets such as debtors, plant and machinery and property to secure a facility.
Assignment – this is the transfer of ownership of the rights to the money due against an invoice. It transfers the ownership from the client to the factoring company or invoice discounting company.
BACS – this is a system used to make electronic payments. This system takes 3 working days to clear.
Cash Invoice – This is an invoice where there is no period of credit and payment is due upon delivery of the goods or services.
CHAPS – an electronic payment system that guarantees same day payment.
CHAPS Fees – these are the fees charged by a lender to make CHAPS transfers.
CHOCS – This stands for Client Handles Own Collections. It is a type of factoring facility where the client handles the credit management themselves.
CID – Confidential Invoice Discounting.
Client – this is typically the business that enters into the invoice finance agreement.
Confidential CHOCS – a facility where clients notify individual invoices as they would with factoring but keep control of the credit management function. The facility is confidential so there is no disclosure on the invoices.
Confidential Factoring – This is a factoring facility where the factoring company makes contact with customers as if they were the actual client. As such the customers are unaware of the factoring companies involvement.
Confidential Invoice Discounting – This is a facility where the invoice discounting company provides a finance facility but takes no active involvement in collecting the client’s invoices and there is no disclosure on the invoices. The facility is confidential and customers are unaware of any lenders involvement.
Credit Protection – this is a product that protects a client against non-payment from their customers. When included a facility becomes a non-recourse facility.
Credit Terms – these are the terms that are given to customers and indicate when payment falls due. An example would be 30-day terms and these should be shown on invoices.
Customer – when referring to customers in relation to an invoice finance facility it usually refers to the client’s debtors.
Debtors – the parties that owe money to a business.
DID – Disclosed Invoice Discounting.
Disclosed Invoice Discounting – A facility where the lender provides no credit control service but there is a disclosure notice on the invoices advising that they have been assigned.
Disclosure Notice – a notice that is on a clients invoices stating that the invoices have been assigned to an invoice discounting or invoice factoring company.
Discounting Charge – This can be equated to the interest rate paid on an overdraft facility. It is the charge for borrowing money and is usually shown as a cost over base rate.
Export Factoring – this is a factoring facility provided to a client who has customers who are abroad.
Factoring – this is a facility where the factoring company provides finance against invoices but also provides a credit management service.
Invoice – this is a document that details the payment required for goods or services that have been provided.
Invoice Discounting – A type of facility where an invoice discounting company provides finance secured against debtors but provides no credit management service.
Invoice Finance – this is an umbrella terms for finance that is provided where the debtor book is used as security. Both factoring and invoice discounting are forms of invoice finance.
Non-Recourse – this means that once the invoice has been notified it will not be recoursed back to the client if the customer fails to pay. The client has taken credit protection to protect against bad debts.
Pre-Invoicing – this is when an invoice is issued prior to goods or services being delivered.
Prepayment – this is the money that a factoring or invoice discounting company will pay against an invoice.
Proforma Invoice – An invoice that is to be settled on cash terms.
Purchase Ledger – this is the ledger that shows all the outstanding purchase invoices due to creditors.
Pre-Lend Survey – Please see survey.
Recourse – this means that an invoice will be given back to the client if the customer fails to pay within an agreed period known as the recourse period.
Refactoring Charge – this is a fee charged by some lenders when an invoice is recoursed back to the client. It is usually expressed as a percentage and is charged against the VAT inclusive invoice value.
Sales Invoice – Invoices raised by a client in relation to products sold or services provided.
Sales Ledger – this is the ledger that shows all the outstanding sales invoices that have been sent to customers.
Service Fee – this is the fee that a lender charges for the administration of the facility. It is usually expressed as a percentage and is charged against a clients VAT inclusive turnover.
Stage Payments – these are payments that are made at various stages of a job or project. These are common in the construction industry.
Survey – this is a type of audit undertaken by a lender at a clients premises prior to a facility being offered.
Trust Account – This is the account set up for an invoice discounting client into which they pay the money they receive from debtors.
