Factoring - The selling of a company's accounts receivable to a third party, in order to obtain funding.
Factoring Agreement – The document containing terms and provisions of a factoring relationship.
Factors Acknowledgment Form - A form sent to the client's customer by the Factor, confirming that the client's invoice does exist and that the customer will remit the payment due under that invoice to the Factor.
Factor's Advance - The initial amount of money the Factor sends to a client, after the verification process is complete and before the Factor receives its money from the client's customer. The advance is calculated as a percentage of the face value of the factored invoices.
Factor's Charge-Back - An amount of money that is owed to the Factor and is deducted or Charged-Back from the reserve to an agreed upon non-payment clause in the Factoring Agreement.
Factor’s Client - The business which sells its Accounts Receivable to the Factor.
Factors Reserve - A deposit maintained by the factor to guard against disputes between the client and the customer and to guard against bad debt losses due to customer non-payment. This is the money retained by the factor when the advance is sent to the client. The Reserve is sent to the client after the customer has paid the Factor the money due on the invoice.
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