Glossary

Terms

Account debtor

The customer that owes payment on an invoice.

Accounts receivable aging

A report that lists amounts owed to a business, grouped by how long each invoice has been outstanding.

Advance

The funds provided against an invoice or collateral before the customer pays.

Advance rate

The percentage of an invoice or collateral value that is advanced. It is set in the financing agreement.

Assignment of Claims Act

The federal law that governs how receivables owed by the United States government may be assigned to a financing provider.

Borrowing base

The value of eligible collateral after advance rates are applied. It sets the maximum amount available on an asset based line.

Borrowing base certificate

A periodic report that updates the value of collateral supporting an asset based line.

Concentration

The share of total receivables owed by a single customer. Financing agreements often address concentration.

Covenant

A commitment in a credit agreement, such as maintaining certain financial ratios or providing regular reports.

Eligible receivables

Receivables that meet the criteria in a financing agreement for funding or inclusion in a borrowing base.

Factoring fee

The charge for a factoring transaction, calculated as set out in the factoring agreement.

Lien

A legal claim on assets that secures an obligation.

Nonrecourse factoring

A factoring arrangement in which the factor assumes defined credit risk on the customer, under conditions in the agreement.

Notice of assignment

An instruction to a customer to pay a financing provider rather than the business that issued the invoice.

Purchase order financing

Financing that pays a supplier to produce or deliver goods against a confirmed customer order.

Recourse factoring

A factoring arrangement in which the business remains responsible if a customer does not pay.

Reserve

The portion of an invoice not advanced, released to the business after the customer pays, less fees.

Schedule of accounts

A group of invoices submitted together for funding.

UCC filing

A public notice, filed under the Uniform Commercial Code, that a lender or factor has a security interest in business assets.

Verification

Confirmation that an invoice is valid and that the goods or services were delivered.

Working capital

The capital a business uses for day to day operations, commonly measured as current assets less current liabilities.