Finance and funding glossary of terms

Updated: 26 July 2022

We have produced an online glossary of terms, developed to help give meaning to the words and any terms you may not recognise when using our website or guides.

Accounts Receivables: Money owed by your customers that you have raised invoices to on credit terms

Advance: The amount of money that we advance to you the day following receipt of your invoices, expressed as a percentage.

Approved Debt: We take the value of the invoices you send to us and reduce it by the level of disapprovals, such as aged invoices, disputes or exceeded credit limits and the amount left is your approved debt.

Assets: Anything that a company owns with a residual monetary value.

Assignment: When an invoice is raised and sent to us, it is effectively sold to us, otherwise known as assigned to/assignment.

Audit: A review carried out by us to ensure that the conditions of your agreement are being met.

Available Funds: This relates to the amount of funding that you have available to use.

BACS: A method of electronic payment. The initials stand for ‘Bankers Automated Clearing System’. Using this system, funds may be transferred from the invoice finance providers account to your own bank account via this system. Although many banks now adopt a ‘faster payments’ policy for online payments, Bacs typically take three working days to clear.

Bad Debt: A debt that has not been collected because of protracted default and/or insolvency of the debtor.

Bad Debt Protection: A facility to protect your business against the impact of a customer’s insolvency or ability to pay.

Blanket Cover: A minimum credit limit that we will apply to all your customers, subject to no adverse credit information being received.

Brokers: Where we work with you (the Broker) and your clients to deliver financial solutions.

CHAPS: A form of payment for same day transactions. It stands for Clearing House Automated Payment System.

Cashflow: The measure of a business’s immediate financial health calculated by cash receipts less cash payments over a specific period in time.

Client Account: Sales ledger total minus the outstanding current account.

Collections: These are the payments we receive from your customers/debtors.

Concentration: The level, often expressed as a percentage, to which we will fund one single customer of your total approved debt.

Confidential Service: This means that your customers are unaware of our involvement.

Contra: Where two companies are both suppliers and customers of each other.

Cover Limit: The amount of bad debt protection provided by us against each of your individual customers.

Credit Limit: The funding limit applied by us to each customer and therefore the maximum funding that will be given against that customer.

Credit Management: Used to describe a business’s management of its accounts receivable.

Current Account: The total amount of funds paid to you including any charges at any given time.

Debtors: Your clients.

Debtor Currency: The currency the debtor is invoiced in.

Disapproval: A collective term covering any reason why an invoice has not been funded e.g. due to age, credit limits, contras, disputes etc.

Disbursement: A charge made for any service provided which is not covered by the service or discount charges. Examples include charges for same day transfers, solicitor letters etc.

Discount Charge: This is the fee we charge you for the money you use. It is similar to the interest rate on an overdraft.

Dispute: If a customer is not going to pay an invoice, it will be classed as a dispute.

Export Debt: The amount of money owed to you by an overseas customer.

Export Finance: Funding to help businesses that sell internationally, providing access to cash tied up in invoices.

Factoring: Funding that provides access to the value of outstanding customer invoices while we manage your credit control and customer payments.

Foreign Exchange: A service to exchange currency and reduce your exposure to the ups and downs of currency fluctuations.

Funding Limit: This is your borrowing limit agreed at the outset of our agreement. This can be changed during the course of our relationship.

Funding Period: 90 days date of invoice to 90 days end of month.

Goods Amount: The value of goods on an invoice.

High Involvement: Please refer to concentration.

Invoice: A document that details the payment required for goods or services that have been provided.

Invoice Date: The date on the invoice.

Invoice Discounting: Funding that provides access to cash tied up in unpaid invoices, while you manage your outstanding customer payments.

Invoice Finance: Funding that gives you access to cash tied up in outstanding customer invoices.

Invoice Finance Charge: A charge made for the administration of your sales ledger, collections and the processing of invoices.

Management Buy-In: A new management team assumes control of a company after acquiring its shares or assets.

Management Buy-Out: The existing management team assumes control of the company after purchasing its shares or assets.

Non-Recourse: An invoice finance solution, which benefits from the addition of bad debt protection to safeguard against debtor non-payment through either insolvency or protracted default, subject to credit limits.

On Account Cash: Occasionally it is not possible to match payments received from your customers against a specific invoice. In this event, the monies will be allocated to the sales ledger as “On Account Cash” until the invoice(s) and cash can be matched back.

Payments: Are the monies that are advanced to you.

Pre-Payment: Also known as an advance. This is the percentage figure that is available the day following receipt of your invoices.

Purchase Ledger: The ledger that shows all the outstanding purchase invoices due to creditors.

Reassignment: If a debt becomes uncollectable for whatever reason e.g. a debtor goes into liquidation, then the debt can be reassigned to you. This means that the debt belongs to you and not us.

Recruitment Finance: Back office administration support and funding to meet your payroll costs.

Sales Ledger: A record of all monies due and received from your customers.

Schedules: A listing of all the invoices that are being sent in at any one time showing the customer name, code, amount and date etc.

SME: Small and medium sized enterprises.

Trust Account: This is the account set up for an invoice discounting client into which they pay the money they receive from debtors.

Vendor Finance: Funding offered to your customers.

Verification: Our credit controllers will regularly contact your customers on a random basis to ensure goods and services have been delivered and performed to your customer’s satisfaction. This process is known as verification.

Working Capital: The immediate cash a business has available to spend on assets and its day-to-day operations. This is calculated by deducting current liabilities from current assets.