- Factoring Company (Factor): The company that purchases the accounts receivable (invoices) from the seller (client).
- Accounts Receivable (Invoices): Money owed to a business by its customers for goods or services provided.
- Client: The business that sells its accounts receivable to the factor in exchange for immediate cash.
- Advance Rate: The percentage of the face value of the accounts receivable that the factor advances to the business upfront.
- Factoring Fee: The fee charged by the factor for their services, typically a percentage of the invoice value.
- Recourse Factoring: Factoring arrangement where the business remains fully liable for uncollected invoices.
- Non-Recourse Factoring: Factoring arrangement where the factor may assume the credit risk for unpaid invoices due to debtor’s credit problem.
- Due Diligence: The process by which the factor assesses the creditworthiness of the client and the debtor.
- Invoice Verification: The process by which the factor confirms the validity of the invoices being factored.
- Accounts Receivable Aging: A report showing the outstanding invoices and their aging (how long they have been outstanding).
- Collection: The process of collecting payment from the debtor for the factored invoices.
- Reserve: The portion of the invoice value that is retained by the factor until payment is received from the customer.
- Notification: The process of informing customers that their invoices have been assigned to a factor for collection.
- Debtor/Customer: The customer who owes payment on the invoices being factored.
- Credit Limit: The maximum amount of credit extended to a business by a factor.
- Factoring Agreement: The contract between the business and the factor outlining the terms and conditions of the factoring arrangement.
For more information, please contact America’s Factors at 800-794-6786, complete the Inquiry Form or Online Application.