Invoice Finance Glossary

Asset Based Lending

Asset Based Lending (ABL) is where a variety of assets are used to secure a facility. These can include property, debtors, plant and machinery and stock.

Audit Fees

The fees that a lender may charge to do periodic audits on your business. Not all lenders charge these.

BACS

This is a method of transferring money that is typically free but can take 3 – 5 working days.

CHAPS

This is another form of electronic funds transfer that is similar to BACS but this transfers funds on the same day. Typically invoice finance providers charge for this service.

CHOCS

Client Handles Own Collections. This operates in the same manner as a factoring facility in so much as the facility is disclosed and the debtor pays the invoice factoring company. However, the client does their own credit control.

Collect Out Fee

This is a fee that is charged when a business fails and a lender has to collect in the debts. It can be as much as 15% of the gross ledger value.

Concentration Limit

This is the amount of debt an invoice finance lender will fund against any one debtor.

Confidential Facility

This is where the end customer is unaware of any invoice finance company’s involvement because the facility is confidential.

Confidential Factoring

A facility where the invoice finance company provides both finance and credit management services to help collect your debts. However, the invoice finance company provides the service on a confidential basis by using your company name when doing the credit control.

Confidential Invoice Discounting

A facility where a lender simply advances finance against invoices at pre agreed rates. The facility is totally confidential and customers are not aware of a lenders involvement. Often referred to as CID.

Debtor Limit

a limit that is put in place for each debtor on a ledger.

Disclosed Facility

A facility where there is an assignment notice on each invoice and as such it is disclosed.

Disclosed Invoice Discounting

A facility where the lender provides finance only but the facility is disclosed – i.e. there is an assignment notice on the invoices.

Early Termination Fee

If you leave a lender for whatever reason during your contracted period they will typically charge an early termination fee.

Facility Limit

The limit that a lender caps an overall facility at.

Factoring

This is where a lender purchases the invoices off a company and provides them with working capital.

Funding Period

The period that lenders will fund invoices for i.e. 90 days from date of invoice.

Invoice Discounting

A facility where the lender simply advances funds against invoices raised within agreed parameters. There is no credit control service and the facility is typically confidential. However, disclosed invoice discounting facilities are also available.

Invoice Finance

An umbrella term to refer to the invoice finance industry and the invoice finance facilities that include factoring, CHOCs, invoice discounting.

Non-recourse Facility

A facility the includes credit protection so that debts are essentially insured.

Notification

The assignment of invoices to an invoice finance company.

Recourse Period

The period that an invoice finance company will finance invoices for i.e. 90 days from date of invoice

Telegraphic Transfer

This is often referred to as CHAPS and constitutes a same day electronic transfer of funds.

Trust account

An account that is allocated to an invoice finance client but is held by the invoice finance company for the debtors to pay into.

Verification

This is where an invoice finance company calls the debtors to verify the invoice is true and correct.