Glossary of Terms

24 hour funding: funding / payment is made electronically to the client by the factor in US or Canadian Dollars within 24 hrs of proof of delivery of goods or rendered services by the client to their customer.

ABL: Asset-Based Lending e.g., based on receivables, inventory, equipment and vehicles.

Aged receivable listings: A listing of customers and the amounts owed as well as the period for which the money is owed.

Assignment: The legal giving over of the security from receivables by the client to either his bank or to the factor.

Bank's release: When the bank line is paid down, the bank will give over, discharge or postpone its security in favour of the factor.

Breach: The client is in breach if it deposits any monies from a factored invoice into its own account instead of paying them to the factor. Failing which, the client may end up with 180% while the factor remains out of pocket.

Charge back: Reversing an invoice

Cherry Picking – Clients have the right to decide which customers they wish to factor.

Client – The party that receives the factor's funding is the party that assigns its receivables to the factor for the factor's security.

Collections – Made by the factor from the customers on behalf of the client.

Concentration – If a client has too few customers, resulting in risks for the client & the factor.

Consignment Sales – When a retail customer has the right to return unsold goods.

Contras or set offs – Usually clients sell goods to its customers, but when the opposite occurs & a customer sells goods to a client whereby it is possible for the customer not to pay the factor because from the set off, the customer will claim money owing from the client.

Credit checking – A vital back-office function performed freely by the factor on customers.

Credit limit – For the client's benefit, the factor may set a high credit limit on a customer, above which the factor will not fund.   

Customers of the client become customers of the factor and pay the factor directly instead of the client because the client has already been paid by the factor..

Debt Factoring: The sale of a business’s invoices to a third party.  Also know as factoring, accounts receivable factoring, invoice discounting

Default – If any customer does not pay an invoice, and if the client is unable to increase the reserve back to the original reserve percentage, then the client can factor more "substituted" invoices to rectify a customer default.

Discharge – If the perspective client is currently factoring its account receivable with Factor “A”, Money on Tap – iFactoring will require the Factor “A” to release all of its security and discharge its registration against the client.

Discounts – Discounts taken by customers when they pay the factor. Such discounts reduce the reserve below the original reserve percentage.  For example, if a customer pays $900 instead of $1,000 as the original amount invoiced.

EDC – Export Development Canada—the Canadian Government's insurance company used for trade credit insurance.

EDI – Electronic Data Interchange is the electronic structured transmission of data between organizations to transfer electronic documents or business data from one computer system to another without human intervention. It is more than mere e-mail; for instance, organizations might replace bills of lading and even cheques with appropriate EDI messages.

Factor Money on Tap – iFactoring -strategically aligned with many of the largest factoring companies in North America.

Factoring: The sale a businesses’ accounts receivable or its invoices purchased at a discount by a factoring company. The factor processes the invoices and collecting payment. The business selling the invoices is able to receive immediate cash on the anticipated payments of the invoices.

Fee / discount – The monthly rate charged by the factor based on the gross amount of all factored invoices.

Full factoring – Continuous or repeated daily, weekly or monthly factoring of those invoices chosen by the client to factor.

Funding – Payments made within 24 hours of confirmation by the factor to its clients.

GSA – General Securities Agreement provides legal protection for the factor based on the factor's first or second position.

High credit – Due to perceived credit weakness in the customer, the allocated maximum allowed or the maximum amount of funding the factor will entertain for any customer.

Hybrid factoring – A type of factoring between spot factoring and full factoring. In hybrid factoring, the client chooses the customers it wishes to factor.

Instant quote – The factor can quote very accurately, depending on the estimated factored sales, the number of invoices per month, the value of each invoice, the strength of the client and the customers' spread of risk.

Letters of credit – Bank guarantees to a client's overseas suppliers paid for purchase order funding. Line of credit – The amount of money made available by a client's bank.

Maxed out – The client has no additional sources of working capital available to fund its growth, running expenses or purchases.

Non-Bankable -The reason why a client may not be able to borrow from its bank.

POD – Proof of Delivery, in writing, including waybills where applicable or other electronic tracking technology.

Postponement (or Subordination) – If the perspective client has previously granted security to its bank or another secured creditor over its accounts receivable, iFactoring Canada will require the bank or the other creditor to sign a postponement (or subordination) agreement in favor of Money on Tap – iFactoring, acknowledging the factor’s priority over the client's accounts receivable. The security registered against the client in favour of the bank or the other creditor remains in place, but is postponed (or subordinated) to the security registered in favour of Money on Tap – iFactoring..

PPSA – Personal Property Security Act, giving the factor its security, enabling it to lend millions to a client.

Progress billing – With machinery, production is billed in stages, making factoring a little more challenging but not impossible.

Purchase Order – PO funding – Purchase-Order Funding. The factor pays the client's supplier prior to the arrival of goods which are presold to customers

Rate – The percentage charged per 2 weeks, monthly for any 45- or 60-day period, which is pro rated after the initial period.

Referral fee – Paid monthly for the life of the funding period to a party who provides the factor with a new client.

Registrations of security – The legal basis of providing the factor with its required security derived from clients' receivables.

Reserve – A 10 – 20% holdback is repaid to the client upon receipt by the factor of the invoice amount paid by the customer.

Returns – Any goods sent back to the client by the customer (the customer's suppliers).

Searches – Legal work done to determine which party, if any, owns and has an assignment of the client's receivables.

Set up fee – A small good-faith once-off payment made by the client to the factor to establish the $5 million line of credit. It may be refundable.

Set-up time – It can take from 3-5 days from the date the factor receives the client's information.

Spot factoring – The purchase of a single “once off “invoice as opposed to full or repeat factoring.

Spread of risk – A well balanced number of customers for each client, and protection for both the client and the factor.

Start-Up – A newly formed business that may be a sole proprietorship, partnership or company with COMPANY receivables.

Tax credits – Amounts owing to clients by the government for Scientific Research & Experimental Development SRED and R & D expenditures.

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