FACTORING GLOSSARY
- ACCOUNT – an invoice or account receivable, legally shortened to “account” in our contract.
- ACCOUNT DEBTOR – the company obligated to pay the Account, also called a Customer.
- ADVANCE – a cash advance to a Client, usually by wire or ACH for 80‐90% of the value of an
unpaid Account. - AGEING – an accounting report that summarizes a company’s Accounts Receivable by Account
Debtor and age of the outstanding, unpaid Accounts. Ageing Columns on the report are usually
grouped into 30 day groupings (eg 0‐30, 31‐60, 61‐90, 91+) - ASSIGNMENT – legal terminology for the “sale” of an account to CoreFund for financing.
- ASSIGNMENT OF CLAIMS – a specific form of notice and acknowledgment that must be
prepared on any factoring transaction that involves the US Federal Government as an Account
debtor. - BILL OF LADING (BOL) OR PROOF OF DELIVERY (POD) – a legal document between the shipper
of goods and the carrier detailing type, quantity and destination. The bill of lading serves as a
receipt proving delivery. The bill of lading must have three signatures: the shipper (proof the
goods were given to the carrier), the carrier (proof the carrier took possession of the goods)
and the receiver (proof goods were received). - BROKER – aka Referral Affiliate, any outside party that refers prospects to a Factor in exchange
for a commission payment. - BDO – or Business Development Officer, a sales agent for a Factor.
- CHARGE BACK – any invoice deemed uncollectible by CoreFund becomes ineligible for an
Advance. When an invoice has been Charged Back, the Client must reimburse CoreFund for any
Advances, or replace the invoice with a new Account. See also: Recourse. - CLIENT – a company under contract to sell and assign their receivables to CoreFund.
- COLLATERAL – an asset that provides tangible Security for a debt or Obligation. CoreFund’s
Collateral on Factoring Obligations is Accounts Receivable. Any lender that takes Collateral is
said to have a Security Interest and must file with the UCC. - CONSIGNMENT – a type of sale whereby the Account Debtor can return product if he is unable
to sell to his customers. Also called a “guaranteed sale”. Consignment Sales are not eligible for
Factoring. - CONSTRUCTION – and industry that is very hard to factor because of unusual business and
billing practices including progress billing, mechanic liens, joint check payments and Pay‐When‐
Paid practices. - CONTRA‐ACCOUNT – when a Client and Account Debtor have sales to each other, a contra
relationship exists. We cannot Factor an Account in this situation, because the Account Debtor
could claim an offset and not pay the invoice. - CUSTOMER – a party that buys goods or services from a client, aka Account Debtor.
- DISCOUNT – the most popular form of pricing a Factoring transaction. CoreFund typically
Purchases an Account at a Discount rate that is established in the terms of the PSA. - DOMINION OF CASH – The factor’s ability to secure payment from a client’s customers.
CoreFund’s willingness to Advance funds against Receivables is based on our ability to have
payments directed to us. When we have control of payments, we have Dominion of Cash. - FACTORING – a form of financing whereby a Factor purchases the Accounts of a Client and
Advances a percentage of the value of the unpaid Account for a Discount. Factoring provides a
benefit to the Client by affording them quicker access to cash than waiting for the payment of
the Accounts. - FINANCIAL STATEMENTS – the income statement and balance sheet of a company, which
report that company’s sales, expenses and profit (income statement) and its assets, liabilities
and net worth (balance sheet). - FRAUD – any number of dishonest practices whereby a borrower attempts to defraud a lender.
- FREIGHT FACTORING – a specialty product offered by CoreFund catering to very small trucking
companies. - FUNDING – popular term for the Advance CoreFund makes to a Client on unpaid invoices.
- LOI – or Letter of Intent is the proposal or term sheet given to a new client prospect. The LOI
includes the general terms offered by CoreFund without obligating us to commit to Funding. - NFE – or Net Funds Employed means the balance of outstanding Advances on a Client’s
Accounts at any given time. NFE also refers to a type of pricing CoreFund sometimes offers to
clients, whereby the fee charged is based on NFE. - NOTICE OF ASSIGNMENT – a letter sent to customers advising them to pay CoreFund on all client
accounts. The notice is legally binding. If a customer pays anyone other party, they have not
relieved their legal obligation to pay CoreFund. - NOTIFICATION – The process of notifying a customer of their obligation to pay CoreFund as per
the terms of a factoring agreement. Usually formalized by the mailing of a Notice of
Assignment. - OBLIGATION – a legal term used in our PSA for any amounts owed to CoreFund.
- PERSONAL GUARANTY – an agreement by the owner/shareholders of the client to personally
accept liability for any Obligation under the PSA in the event CoreFund cannot otherwise collect. - PROOF OF DELIVERY – any form of documentation such as a Bill of Lading that is used by
CoreFund in the Verification process to validate delivery and receipt of goods. - PSA or PURCHASE AND SALE AGREEMENT – Our factoring contract, so‐called because legally the
client “assigns” or sells the account to CoreFund. Assignment is legally necessary to secure
Dominion of Cash. - PURCHASE – another word for an assignment of an invoice(s) to CoreFund for Funding.
- PO FINANCING – a form of financing whereby some form of financing is provided to a client in
order to help fulfill a Purchase Order (PO) with a customer. Unlike Factoring, where financing is
provided based on an Account after the sale, PO Financing is provided before the sale. PO
Financing is very specialized. Many prospects who think they need PO Financing can actually be
serviced through Factoring. - RECOURSE – the “selling back” of an Account to the client. 90 day Recourse means that is an
Account is still unpaid after 90 days, it is Charged Back to the client. - RESERVE – the non‐funded portion of an Account. If CoreFund advances 80% against an unpaid
account, the Reserve is the 20% balance. - RESERVE RELEASE – payment to a Client of the Reserve amount after collection.
- SECURITY – terminology used when a lender has Collateral.
- STAFFING – a type of business that provides temporary workers or consultants to another.
Factoring is popular with Staffing businesses. - UCC – Uniform Commercial Code, a method whereby any Secured Lender must file a public
notice that they have a Security interest in the assets of a Client. CoreFund files a UCC when we
take on a new Client. CoreFund cannot take on a new Client if there is an existing UCC filing on
the Client’s Accounts. - UNDERWRITING – the process of due diligence, legal documentation and formalizing the
structure of any new Factoring Client. - VALIDITY GUARANTY – Like a Personal Guaranty, but in this case the individual is liable for
Obligations only if they committed fraud or provided CoreFund with invalid documentation. - VERIFICATION – a process whereby CoreFund personnel confirm the validity of an invoice.
Verification may be performed by phone, e mail, or review of support documents.