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Please find below a glossary of terms used which may help you when looking into invoice financing.
Sales Ledger: A record of all invoices due and all money received from each of your customers.
Bad Debt Protection: This is an insurance option that is available to protect you against non payment or insolvency of your debtors.
Contra: Where two businesses are customers and suppliers to each other.
Credit Limit: The maximum amount of funds that can be drawn.
Advance: The percentage of the invoice value that is made available to you (in advance of payment)
Reassignment: Sometimes due to a customer becoming insolvent a debt may become unrecoverable. If this happens, unless you have Bad Debt Protection, the debt will be transferred back to you and the advance in respect of that debt will be drawn back by the lender.
Approved Debt: From the value of invoices you send to the lender, the lender will reduce it by “disapprovals”. This includes such things as invoices over 90 days old, disputed invoices or individual credit limits that have been exceeded. The approved debt is the amount of the invoices submitted less any disapprovals.
Assignment: When you raise your invoice you “assign” it to the lender – essentially transferring ownership of the debt it to them.
Audit: The lender will carry out an appraisal to make sure you are abiding to the terms of your contract.
Availability: This is the amount of funding that is accessible to you at any time.
Bad Debt Protection: This is an insurance option that is available to take out that will protect you against non-payment or insolvency of your debtors.
Collections: Payment received from your debtors against invoices issued.
Disbursement: Extra charges applied for matters such as same day transfers or legal documents.
Factoring Fee: Also known as a service fee. A cost for the management of your ledger and the provision of the facility.
Funding Limit: The agreed maximum amount you can borrow.
Payments: Money that is advanced to you by the lender.
Dispute: If your client refuses for any reason not to pay your invoice.
Export Debt: If you are owed any more from a customer outside the UK.
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