Partnership factoring
See Agency Factoring.
Payment report
A periodic report from a factor to his client (or from and import factor to an export factor) of payments received from debtors since the last such report. [2]
Permitted limit
See Credit limit[2].
Prepayment
A payment, made by the factor to the client on receipt of a notification or schedule offer, on account of the purchase price. Also known as the advance amount [2].
Progress payments
Where a supplier invoices the debtor for part of the work it has done as part of a total contract and the debtor agrees to pay these invoices subject to that the work of the supplier continues as per the contract.
Proof of delivery
Normally a delivery docket showing that the goods/service have actually been delivered to the debtor.
Purchase order
A client’s customer sends a form (purchase order) outlining the goods/services it requires to be supplied at what price, the quantity and when it is to be delivered by the supplier.
Receivable
A Debt[2].
Receiver
an administrator appointed to take charge of the affairs and property of a company until debts are paid or a court matter settled. A receiver can be appointed by a secured creditor or by a court. [1]
Receivership
The state of a company whereby a receiver has appointed to oversee the affairs of the company until the debts are paid or the court matter settled. See Receiver.
Record Account
Another term for a debts purchased account. [2]
Recourse
The right of the factor to be guaranteed the due payment of a purchased debt by debtor or to have an unpaid debt repurchased by the client. [2]
Refactoring charge
An additional administration charge made by some factors in respect of any debt, which is subject to recourse and remains unpaid after a specified period, in consideration for the factor’s not exercising his right of recourse. [2]
Related rights
See Ancillary rights. [2]
Reserve
See Retention. Normally refers to both the non-cash reserve/retention plus the cash reserve/retention
Retention of title
Whereby the ownership of the goods does not pass from the supplier to the debtor until the goods have been paid for in full.
Retention
A minimum credit balance in favour of the client retained by the factor on the account (or a combination of accounts) of the client held by the factor. The retention is held to provide for the set-off of amounts payable to the factor by the client, particularly for the repurchase price of debts the subject of recourse or setoff. Also known as the reserve [2]
Reciprocal tax invoices
See self billing
Sale or return
Whereby the debtor has the right to return the goods to the supplier if the goods are not sold by the debtor in a particular time frame.
Schedule of debts
the summary of the debts the client presents to the factor/discounter for assigning of the debts. Whether this is used or not depends of the contract between the factor/discounter and the client. See schedule of offer
Schedule of offer
A list of invoices constituting an offer (under a facultative type of agreement) to the factor by the client of the debts represented by the invoices. [2]
Self billing
Arrangements by which the buyer raises invoices on the basis of orders placed and good received. [2]Seller: Client[2] Also known as Reciprocal Tax Invoices
Service charge
See Activity fee. [2]
Service fee
See Activity fee
Set-off
A debtor takes off amounts from its indebtedness for a variety of reasons normally because it believes it has the contractual right to do so.
Shadow ledger
The factor/discounter on their own system keeps a mirror of client’s accounts receivable ledger where a discounting/confidential factoring facility is in place
Shipping limit
A limit of deliveries prescribed by the factor per specified period (often per month) for the purpose of determining which debts are approved for credit or eligible for prepayment. [2]
Single factor system
a modification of the two factor system by which the correspondent factor becomes responsible for collection only when difficulties arise. [2]
Sole trader
Whereby a person personally trades as a business. Often a business name may be registered to this person.
Solvency
A state of affairs whereby a company is able to meet its debts as and when they fall due. The opposite is insolvency.
Statements
Notices to the debtor outlining what is owed by the debtor and what age the debts are. This allows the debtor another record to pay on.
Supplier
See Client[2]
Survey
An investigation by a factor as to suitability of a prospective client. [2]
Switch on letter
See Introductory letter. [2]
Switch on
See Take on. [2]
Take on (or take-over) debts
Debts purchased by the factor and outstanding at the start of factoring. [2]
Take on (or take-over)
The entering of the debts purchased by the factor and outstanding at the date of the commencement of a factoring agreement into the records of the factor and the start of the practical arrangements for factoring. [2]
Terms of trade
The approvals given to the export factor by the import factor can be made in one of two ways.
The export factor enters into a factoring agreement, covering the full service, with the client (exporter) and makes arrangements with import factor to act as his correspondent factor.
The exports from the client to the distributor will then be factored through the two factor system in the usual way except that settlement by the distributor to the import factor (and consequently the import factor to the export factor) will depend upon his sub-sales and the position on his account with the import factor. [2] The import factor enters into a factoring agreement with the distributor for his domestic sales. This agreement may be for any form of factoring in which prepayments are available. However, the normal arrangements will be varied.
Two factor system
A system by which the client’s factor sub-assigns export debts to correspondent factors in the countries of the debtors and by which the latter are responsible for collection and the credit risk in relation to such debts as are approved. [2]
Unallocated cash
Payments made to the factor which the factor is not able to reconcile to a debtor or invoices.
Unapproved
In relation to a debt; subject to recourse and (particularly in the case of any form of factoring with recourse in relation to all debts) not eligible for prepayment or funding. [2]
Verification
Method of analysis to determine the validity and true value of the debt. This may include contacting the debtor about the debt or checking of paperwork such as purchase orders, delivery dockets etc.
Volume rebates
Normally occurs in the retail industry. This is where major retailers deduct from the amount they owe a client a percentage based on the amount of goods they have purchased from the client. In effect it is a set-off.
Waiver
a release of debts from a charge or other encumbrance. [2]
Warranties
Can be either the claims made as to the validity of the debt by the client and or the warranty given to the debtor about the goods or services supplied to the debtor.
Whole turnover agreement
An agreement which itself provides for the assignment to the factor of all existing and future debts (or all of a class of debts) of the client without any further act of transfer of the individual debts. [2]
Winding up notice
Whereby a creditor gives to its debtor a notice through the court system that the debtor must pay the debts by a set date or be put into liquidation.
[1] The Language of Money. Edna Carew
[2] The Law and Practice of Invoice Financing, F.R. Salinger