Glossary

Upon taking title to invoices, the factor immediately pays to the client a percentage of their total face value. This payment (called the "advance") typically falls between 70% and 85%.

the risk of default on a debt that may arise from a borrower failing to make required payments

A measure of a debtor's ability and willingness to pay.

a company that sells its accounts receivables to meet its present and immediate cash needs

a company that buys another business’s receivables allowing firms to get quick working capital

the factor has the right to collect the unpaid invoice amount from the debtor

When a company sells its assets (real estate or equipment) to then lease it back

the factor must bear the loss if the account debtor does not pay the invoice amount. In the case of asset based financing, the company remains liable for insolvency

receivables are transferred to the lender when they are pledged as collateral