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Invoice Factoring Glossary by Alpha
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Face Amount or Face Value
The total dollar amount of an invoice. This is the amount that has to be paid to the factor by your client's customer, without consideration as to how much was advanced to the client.
Factor
A company that purchases accounts receivable (invoices) or purchase orders from a client. The funding source for a client.
Factoring
The selling of a company's accounts receivable to a third party at a discount, in order to obtain funding.
Factors Acknowledgement Form
A form sent to the client's customer by the factor, confirming that the client's invoice does exist and that the customer will remit the payment due under that invoice to the factor.
Factors Advance
The money the factor sends to the client up front, after the verification process is complete, and before the factor receives its money from the client's customer. The advance is figured as a percentage of the face value of the factored invoices.
Factors Chain International
FCI is a global network of leading factoring companies, whose common aim is to facilitate international trade through factoring and related financial services.
Factors Charge-Back
An amount of money that is owed to the factor and is deducted or Charged-Back from the reserve or availability of the line due to an agreed upon non-payment by debtor clause in the Factors contract.
Factors Client
The business which sells its accounts receivable to the factor.
Factors Fee
The fee the Factor Charges for factoring the clients accounts receivable.
Factors Reserve
A deposit maintained by the factor, to guard against disputes between the client and the customer, and to guard against bad debt losses due to customer non-payment. This is the money retained by the factor when the advance is sent to the client. The Reserve is sent to the client after the customer has paid the factor the money due on the invoice.
Factors Reserve Release
The amount of money released from the Factors Reserve once payment has been received and credited. The Reserve Release may be less any charge-back or fees associated with the services.
Factors Services
Accounts receivable funding, credit analysis, credit guarantees and collection management.
Factors Verification
Process by which the factor verifies that the product or service provided by the client was received and accepted by the customer, and that the customer intends to pay the factor the money due under the invoice. This process takes place before the factor sends the advance to the client.
Funding
Advancing money (based on the advance rate) to a client.
Funding Source
An factor or an investment company that buys accounts receivable or liquid assets at a discount.
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