book to represent invoice factoring glossary

Invoice Factoring - Glossary of Terms

Posted: 29th May 2019

Fact: 60% of SME businesses are unaware of alternative finance options

With over 44,000 businesses using a factoring facility to ensure they have a fluid cashflow, despite late paying customers, shouldn’t you make yourself aware of the benefits?

Here, to help you understand invoice financing we have put together an invoice factoring glossary of terms:

Advance
The amount of money the factoring provider will give you (pay out) on each invoice. Usually this is up to 90%, the balance of which is paid once your customer has settled their invoice.

Audit
The check the factoring provider carries out on your business to ensure the correct terms of your agreement.

Availability/ Current Account
The amount of money that is available to be paid to you. This is after charges from the factored invoices have been deducted.

Bad Debt
If your customer has not met their invoice obligations. Most invoice factoring companies will include Bad Debt Protection (BDP) as standard to protect both parties against non-payment.

Book Debts
The outstanding amount of monies owed to a business by its debtors (customers) i.e. unpaid invoices.

Cashflow
The total amount of money being transferred into and out of a business.

Collections
The money the factoring provider retrieves from each issued invoice.  

Confidential Invoice Discounting
The same benefits of invoice factoring, but customers are not aware of the finance facility. Credit control and collections are managed by the client business.   

Debt Turn
The time it takes from issuing your invoice to it being paid.

Facility Limit
The maximum amount of factored/advanced invoices approved within the facility agreement.

Factoring
The term giving to the funding offered by effectively ‘selling’ your invoices to the factoring company, which can result in them paying you up to 90% within 24 hours (after taking any fees). They can then chase and collect payments, paying you the balance once the invoice is settled.

Factoring Fee/Advance Rate
The agreed amount the factoring provider will charge to factor said invoices. Normally a percentage of the invoice value.

Recourse Period
This is the time that your factoring company allows for your customer to pay an invoice that has been funded. If a customer does not pay the invoice by the end of the recourse period, the factoring company may withdraw funding for that invoice.

Selective Invoice Finance
An invoice finance facility whereby only selected invoices are factored – beneficial to those businesses that experience either seasonal highs and lows, or large ad hoc invoices.

There are many factoring companies in the UK; however, many are large corporations, lacking the personal touch. Here at Calverton Finance, we aren’t the biggest, nor do we want to be. Instead, we aim to be the best and are proud to provide award winning invoice factoring services to UK SMEs - tailor made facilities to suit every type of business, whether it’s a start up or established business.

To see just how good we are contact us 01908 268888 or email enquiries@calvertonfinance.co.uk  or go online for a 5 minute in principal approval.