IFD
Institute for factors and discounters of Australia and New Zealand
Import factor
A correspondent factor (normally in the country of the debtors) who is prepared to take sub-assignment of debts owing by such debtor and consequently be responsible for collection and/or the credit risk. [2]
Import factoring
See Import Factor
(indirect payment)
A payment made by a debtor to client for a debt purchased by the factor contrary to a notice of the assignment of those debts. [2] Also known as misbanking
Ineligible debts
a debt in relation to which the factor is not prepared to make a prepayment on account of the purchase price (for example, by reason of a breach of warranty by the client in relation to the debt or by reason of its being in excess of a limit prescribed by the factor in relation to the debtor). [2]
Initial payment
see Prepayment [2]
Insolvency practitioner
An accounting firm or accountant that is accredited to be able to carry out administrations, receiverships, and liquidations
Insolvency
a situation where the value of liabilities exceeds the value of assets and a person is unable to pay debts as they fall due. A company or an individual can be insolvent. [1]
Institute for factors and discounters
An association of factors and discounters to promote factoring and discounting to the Australian market place and work as a lobby group to governments and industry associations.
Interfactor agreement
An agreement between correspondent factors whereby they mutually agree to act as import and export factors in accordance with a code or practice. [2]
Introductory letter
A letter sent to each of the debtors by a client at the start of factoring (on a disclosed basis) for the purpose of explaining the factoring arrangements and instructing the debtor to pay the factor for all supplies by the client until further notice. [2] Also known as Notice of Assignment
Investigative accountant
An accountant appointed by the factor/discounter to investigate the state of affairs of a client. This is only done where there are severe problems with the client
Invoice
A form of notice given to a debtor by a supplier outlining the debt amount and what it was for.
Invoice discounter
A Bank or Finance company that offers invoice discounting facilities to clients. See Discounter and Invoice Discounting.
Invoice discounting
Where the debtor is not aware the client’s debts have been assigned to the discounter. The client acts as collection agent for the discounter. The client allocates the payments for the assigned debts in a separate account on trust for the discounter. This account is then swept by the discounter. Also known as confidential factoring.
Invoicing in advance
Where a client creates an invoice for good or services not yet or only partially completed and presents it to the factor/discounter for an advance. This is in breach of the agreement and borders on fraudulent activity.
Letter of credit
an irrevocable and unconditional undertaking by an international bank (sometimes local banks also issue letters of credit) to repay the principal and interest of a loan in the event of default by the borrower. Letters of credit help the flow of trade and financing by giving added assurance to a lender that a loan will be repaid or goods paid for. [1]
Liquidated damages
Normally found in construction contracts but may also be in other contracts. It is where a debtor can claim against a supplier for damages for not supplying the goods or services on time or as described. This may lead to setoffs against the debts
Liquidation
Where a company is officially terminated and will cease to exist. A liquidator is an appointed to oversee the orderly close of the business.
Liquidator
a person/accounting firm is appointed to see to the winding up and liquidation of a company. A provisional liquidator is appointed by a court, normally as a matte of urgency because it is feared that the assets of the company may be ‘dissipated’. [1]
Maturity date
The due date for payment of the purchase price of a debt purchased by the factor after the deduction of any prepayment made in respect of that debt. It is normally the end of the maturity period in relation to each debt. [2]
Maturity factoring
A factoring arrangement whereby payment of the purchase price of each debt is made on the maturity date, often without any provision for prepayments. The term is sometimes used for an arrangement for payment of the whole of the purchase price of each debt on the collection date without any prepayments; in such a case the factoring is to relieve the client from administrative functions and bad debts. [2]
Maturity period
The number of days after invoice date (or the end of the month in which the invoice is dated or the date of the receipt by the factor of copy invoices) fixed by reference to a historical average period of credit taken by debtors. The period is the basis for fixing a maturity date. [2]
Minimum balance
Another term for retention or reserve. [2]
Misbanking
Where a clients banks into their own account the payment for an assigned debt instead of it going to the factors/discounters bank account. This is a cardinal sin in factoring/discounting.
Mortgage Debenture
See Charge
Non-cash retention
See Escrow reserve/retention
Non-notification factoring
See confidential factoring [2]
Non-recourse
where the borrower has no liability to repay the debt except from the proceeds of the venture in which the funds are used. [1]
Notice of assignment
A letter sent to each of the debtors by a client at the start of factoring (on a disclosed basis) for the purpose of explaining the factoring arrangements and instructing the debtor to pay the factor for all supplies by the client until further notice. [2] Also known as an introductory letter
Notice period
Normally the period of time the client has to give the factor/discounter to end the contract between the client and the factor/discounter.
Notification
A report by the client to the factor of the coming into existence of debts (already purchased by the factor pursuant to a whole turnover type of agreement often by the submission of copy invoices. The expression is sometimes also used to denote notice to a debtor of the assignment of his indebtedness. [2]
Old line factoring
Full factoringi.e. traditional factoring. [2]
Open account credit
Credit not covered by a bill of exchange or promissory note. [2]
Open item sales accounting
A system of accounting by which the balance owing is broken down into the individual invoices remaining outstanding and unallocated payments and credits. [2]
[1] The Language of Money. Edna Carew
[2] The Law and Practice of Invoice Financing, F.R. Salinger