Accounts Receivable Financing - A short-term financing technique to raise working capital. Loans to a company are collateralized by a security interest in a company's Account Receivables. Account Receivables serve as collateral, and loans are made on a percentage of eligible assets pledged.
Asset Based Lending - A business loan where the borrower pledges as collateral for the loan any assets used in the conduct of his or her business. Funds are used for business related expenses. All asset-based loans are secured.
Credit - A privilege granted for the purpose of extending time to make payment on a debt.
Customer - The Company owing for the goods and services received. (Also known as the Account Debtor.)
Dilution - The amount of risk associated with the collection of the accounts receivable. It can include returns, charge-backs, trade allowances, concentrations, slow pay, bad debt and other perceived risks.
Discount Fee - The fee the Factor charges for funding a client's A/R. (Also known as the Factoring Fee.)
Due Diligence - Background check and research conducted by the Factor to assess the validity of a prospective client and that client's customers.
Factoring Company - The funding source for the client. The company purchasing accounts receivable (invoices) from the client. (Also known as the Factor.)
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