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Invoice Factoring Glossary by Alpha
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Capital
Broadly, all the money and other property of a corporation or other enterprise used in transacting its business.
Capital Budgeting
The process of planning and managing a company's long-term investments.
Capital Net Worth
The amount of funds remaining in a business after all debts have been satisfied; i.e. assets over liabilities.
Capital Structure
The combination of debt and equity a company maintains.
Cash Flow
The flow of cash through a business or household. In business terms, cash flow involves the flow of cash into a company in the form of revenues, and out of the company in the form of expenses.
Chapter 11
A Federal Bankruptcy Act where a debtor can maintain control of its business and operations, under court supervision, as long as current debts remain paid.
Clients
The individual or company that sells its accounts receivables to a factor or other financial entities.
Collateral
Something of value (accounts receivable, purchase orders, equipment, other assets, etc.) that is pledged as security to ensure the payment of a debt. Collateral is promised to a lender or factor until a loan is repaid or an invoice collected. If the borrower defaults, the lender has the right, by law, to seize the collateral.
Collectibilty
Refers to the funding source's ability to collect future income stream payments once they are purchased.
Commercial Credit Insurance
Insurance against large losses from the uncollectability of accounts receivable.
Commercial Finance
Commercial Finance is concerned with loans and other credit for business purposes, compared to personal loans which are for an individual.
Concentration
The amount of one client's accounts receivable due from a single customer. A large concentration for a single customer is considered high risk.
Confidential Invoice Discounting
An arrangement between a client and a factor in which the factoring relationship is not disclosed to the client's customers.
Contract
An oral or written, often legally-binding, agreement between two parties.
Corporation
A legal entity which can own property, incur debts, sue, and be sued. Corporations provide for limited liability, easy transfer of ownership and continuity of existence.
Credit
A privilege granted for the purpose of extending time to make payment on a debt.
Credit Analysis
An analysis of records and financial affairs to determine the creditworthiness of a business.
Credit History
A record, prepared by an independent source, of an individual's or company's debts and status of their payment, useful to a lender in qualifying a potential borrower for a loan or for factoring. Also called a credit report.
Credit Profile
Profile of an individual or company's capacity to receive credit and honour the terms and conditions of commercial credit.
Credit Report
A report documenting the credit history and current status of a borrower's credit standing.
Credit Score
The evaluation system used by lending institutions to determine relative credit riskiness of a business or consumer. When evaluating businesses, it generally considers factors such as credit payment history, new credit sought by owner of business, and financial strength and longevity of business.
Creditor
One who is owed payments on a debt by a debtor.
Current Asset
Assets that will normally be turned into cash within a year.
Current Ratio
The current ratio is a test of a company's financial strength. It calculates how many dollars in assets are likely to be converted to cash within one year in order to pay debts that come due during the same year. The current ratio is calculated by dividing the total current assets by the total current liabilities.
Customer
The client's customer. The company which pays the money due under the factored invoice. Also known as the account debtor.
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