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Invoice Factoring Glossary by Alpha
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Partnership
A contract between two or more people in a joint business venture who agree to pool their funds and/or talents and share in the profits and losses of the enterprise. General partners are those who are responsible for the day-to-day management of activities, whose individual acts are binding on all the partners, and who are personally responsible for the partnership's total liabilities. Limited partners are those who contribute only money and are not involved in management decisions and whose liability is limited to the amount of their investment.
Payee
Person or business that has the right to receive a payment or series of payments and is interested in selling that income stream for cash. (Also called the seller or client.)
Payor
The person, company, or government responsible for making payments on a debt obligation.
Personal Guarantee
A contractual agreement in which a principal of a corporation assumes personal liability for the obligations of the corporation.
Pre-Ship Invoice
A legal debt instrument which indicates the amount due from a customer to pay for goods or services which have NOT yet been delivered. Generally, factors will not purchase pre-ship invoices.
Prime Rate
The most favorable interest rate that banks charge, usually to their preferred customers. When factoring with recourse, the factoring fee is generally prime rate plus an additional 2 - 3 percent.
Principal
The owner of a privately held business, or one of the main parties (buyer or seller) involved in a transaction.
Principal Generally
A major party to a transaction, acting as either a buyer or seller; or the owner of a privately held business.
Priority Lien
First position; the senior lender in a transaction.
Profit and Loss Statement
A financial statement that shows a historical record of a business' income and expenses. Also referred to as an Income Statement.
Purchase Order
A document or form used by a customer to issue an order for goods or services.
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