June 6, 2012
Do you have questions about accounts receivable factoring? About how it’s a form of asset based lending? Find the definitions you need here, now.
Account: A collection of claims or invoices against a particular customer for goods or services delivered.
Account Creditor: The factor’s client; the company selling its accounts receivable for cash.
Account Debtor: The customer of a factor’s client; the company owing the money due on the invoices, also known as the customer.
Accounts Payable: The amount a company owes for goods and services it has received, but for which it has not yet paid. Accounts payable are considered a liability on your balance sheet.
Accounts Payable Aging: A report showing how long invoices due to vendors have been outstanding.
Accounts Receivable: The amount owed by a customer or account debtor to your company for goods or services already rendered and invoiced. The amount owed is evidenced by an invoice specifying goods or services provided and agreed-upon payment terms. Accounts receivable are considered an asset on your balance sheet.
Accounts Receivable Aging Report: A report showing how long invoices from each customer have been outstanding.
Accounts Receivable Factoring: A short-term financing technique to raise working capital. Advances to the company are collateralized by a security interest in a company’s account receivables. Account receivables serve as collateral, and advances are made on a percentage of eligible assets pledged. Also known as account receivable factoring, receivables factoring or invoice factoring.
Advance: The money the factor sends to the client immediately after invoice verification is complete. The advance is figured by multiplying the advance rate by the face value of the factored invoice(s).
Advance Rate: The percentage of the factored invoice advanced to a client upon initial invoice funding. The advance rate is typically expressed as a percentage of the total invoice amount. Advance rates usually range from 70-90%.
Amortization: The gradual, systematic payment of a debt, such as a mortgage or other loan, in installments of principal and interest for a definite time so that, at the end of that time, the debt will have been paid in full.
Articles of Incorporation: A document filed with a U.S. state by the founders of a corporation. After approving the articles, the state issues a Certificate of Incorporation. These two documents then become the Charter of Incorporation.
Asset: Anything owned by a business that has commercial or exchange value. A company’s assets might include real estate, equipment, inventory, intellectual assets (such as copyrights or trademarks) and accounts receivable.
Asset Based Lending/Loan: A form of business lending/loans where the borrower pledges collateral, such as account receivable, equipment and inventory, to a lender as additional repayment security against monies advanced. Funds are used for business-related expenses. All asset-based loans are secured. Accounts receivable factoring is a form of asset based lending.
Assignability: The ability to assign (or sell) an income stream to another individual or business.
Assignee: The person or business entity that is given, obtains or buys the right to an asset.
Assignment: The transfer of the rights, title or interest of any debt instrument that is properly owned by another party.
Assignor: The person giving or selling an asset and, subsequently, forfeiting rights to that asset.
Still have questions about accounts receivable factoring or asset based lending? Call MP Star Financial at 1-800-833-3765 Ext. 150 or email us with your questions about your accounts receivable factoring today.