Glossary
Acceptance:
Voluntarily agreeing to the terms of an offer, creating a contract, often seen in the prepayment to the client by the financier.
Acknowledgement:
Recognition that a debt has been assigned to the financier or other security taken, typically outlined in an agreement between parties.
Additional Service Fee:
Fee payable for ongoing collection costs or continued funding of a debt outstanding beyond a specific period.
Administration Charges:
Fees covering additional services or risk applied in managing an invoice finance facility.
Aged Creditor Report:
Analysis of amounts owed to creditors by due date or invoice date.
Aged Debtor Report:
Analysis of outstanding debts by due date or invoice date.
Agency finance:
Financing dedicated to servicing agencies, such as MONET's EarlyPay, which is a form of invoice finance for agencies.
Agent:
Person appointed to act on behalf of another, often seen when the client acts as an agent for the financier in collecting outstanding debts.
All Asset Debenture:
Security document creating fixed and floating charges over all assets of the entity.
Arrangement Fee:
Fee charged at the commencement or variation of a facility, reflecting investment and management costs.
Asset-Based Finance:
Finance provided based on the assets within a business, including invoice finance and asset-based lending.
Asset-Based Lending:
Agreement where a business pledges collateral, such as stock, machinery, or property, for a structured facility combining secured loans and revolving credits.
Assignation:
Assignment of a debt or receivable under Scots law.
Assignment:
Transfer of ownership of any asset, including debts.
Assignment, Notice Of:
Notice informing a debtor that debts have been assigned to the financier and payment should be made to them.
Assignee/Assignor:
Entity to which a debt is assigned (assignee) or transferring the asset by assignment (assignor).
Availability:
Amount of money available to the client under a finance arrangement at a specific time.
Bad Debt:
Unpaid debt due to protracted default or insolvency of the debtor.
Bad Debt Protection:
Mechanism to mitigate the impact of bad debts, provided as part of recourse or non-recourse facilities.
Ban on Assignment:
Clause prohibiting assignment of the contract or debts.
Book Debts:
Amounts owed to a business by its debtors, also known as accounts receivable.
CHOC (Client Handles Own Collections):
A hybrid of factoring and invoice discounting where the client manages credit control for a specified period.
Deeds of Priority:
Contractual arrangements between security holders regulating priority, rights, and realizations from assets.
Client/Customer:
Entity entering an asset-based finance agreement.
Client Account:
Theoretical value due to the client if all debts were paid immediately.
Collect Out Fee:
Fee covering costs of collecting a sales ledger post-client insolvency.
Concentration Limit:
Maximum funding against debts in a specified category.
Confidential Facility:
Invoice financing where the debtor isn't notified of the assignment.
Contra Trading:
Buying from and selling to the same debtor, impacting debt value.
Contract of Sale:
Agreement between client and debtor for goods or services supply.
Correspondent Factor:
Factor acting as an import/export partner in the two-factor system.
Covenant:
Agreement in the invoice finance contract, breach may restrict funding.
Credit Protection:
Insurance to protect against defined non-payment circumstances.
Credit Limit:
Max value of outstanding debts covered by bad debt protection.
Credit Note:
Document reducing or extinguishing the value of an associated invoice.
Debt:
Monetary obligation owed by one entity to another.
Debt Collection:
Collecting unpaid debts, may include legal action.
Debt Turn:
Measure illustrating the average time for debts to be paid.
Debt Verification:
Process confirming the validity of debts.
Debt, Approved:
Debt eligible for funding and notified to the financier.
Debt, Disapproved/Unapproved/Ineligible:
Debt not meeting funding criteria.
Debt, Disputed:
Debt subject to a debtor dispute, may be withdrawn from funding.
Debt, Excluded:
Debts not covered by an invoice finance agreement.
Debt, Notifiable:
Debt within the scope of a financing arrangement.
Debt, Take On:
Value of receivables notified to the financier at the facility's start.
Debtor:
Entity obligated to make payment for goods or services.
Dilutions:
Situations reducing the value of an outstanding invoice except debtor default.
Direct Banking (By a Client/Customer):
Banking proceeds into an account other than specified by the financier, a breach of agreement.
Direct Payment (By a Debtor):
Debtor payment into a non-specified account, also a breach.
Discount Charge/Fee:
Fee levied against funds in use, calculated similarly to interest.
Domestic Factoring:
Factoring where both client and debtor are in the same country.
Export Debt:
Debt payable by a debtor outside the supplier's country.
Export Factoring:
Factoring where the client assigns debts from debtors in another country.
Factoring:
Purchase of outstanding debts by a factor, who administers the client's sales ledger and collects debts in their name.
Funding Limit:
Max value of outstanding debts owed by a specified debtor eligible for funding.
Funds In Use (Account):
Balance owing to the financier at a given time, comprising prepayments, fees, and charges less debtor payments.
Future Debt:
Debt coming into existence after the facility's start.
Import Factoring: Factoring where an import factor collects debts from a debtor in the same country.
Inter-Factor Transfer:
Transfer of a client from one invoice financier to another.
Invoice Discounting:
Purchase of outstanding debts by a financier, but the client administers its sales ledger and collects debts.
Invoice Finance:
Finance based on the purchase of a client's debts, including factoring and invoice discounting.
Invoice Finance Agreement: Legal agreement enabling the sale and purchase of a client's debts.
Maximum Funds In Use:
Max amount a financier provides to a client under a funding facility.
Minimum Period:
Minimum length a financing arrangement must be in place before termination.
Non-Vesting Debts:
Debts where ownership isn't transferred but held in trust for the financier.
Notice Period:
Time notice must be given before terminating a facility.
Notification:
Process of informing the financier of a created debt.
Offer Letter:
In-principle offer detailing main commercial terms for a facility.
Overpayment:
Amount by which funds drawn exceed availability.
Prepayment:
Payment in advance of all or part of the purchase price of assigned debts.
Prepayment Percentage:
Percentage of approved debt value for prepayments.
Recourse Invoice Finance:
Form of invoice financewhere the risk of non-payment by debtors remains with the client, which is how MONET conducts our EarlyPay product.
Non-Recourse Invoice Finance:
Form of invoice finance where the risk of non-payment by debtors is transferred to the financier.
Recourse Period/Funding Period:
Duration during which a financier provides funding against a debt, after which uncollected debts may be unapproved.]
Reserve(s)/Retention(s):
Amount held back from availability to cover risks or debts outside funding criteria.
Retention of Title (ROT):
Supplier's retention of ownership until payment, providing security against default or insolvency.
Sales Ledger Account:
Amount owed to a client by its debtors, minus credit notes and payments received.
Service Fee Charge:
Charge for provision of invoice finance facility, often a percentage of assigned invoices or a fixed monthly fee.
Supplier Finance/Supply Chain Finance:
Services offering credit support for suppliers, often involving reverse factoring.
Take On:
Process of verifying and loading a sales ledger onto a financier's system for funding commencement.
Termination Event/Default Event:
Event allowing termination or acceleration of a facility, such as breach of terms or insolvency.
Termination Fee/Break Fee:
Fee charged if the agreement is terminated before its agreed term.
Trust Account/Specified Account:
Bank account where proceeds of funded debts are held on trust for the financier.
Two-Factor System:
System used in export factoring where a factor uses a correspondent factor to collect debts from a debtor in another country.
Undisclosed Factoring/Confidential Factoring:
Factoring where notice of assignment isn't given to debtors until required by the factor.
Value Date:
Date on which a transaction is considered to have occurred, often used in determining interest or fee calculations.
Verification Process:
Process undertaken by a financier to confirm the validity of debts, often involving communication with debtors.
Waiver:
An agreement to waive a particular right or claim, often seen in invoice finance agreements regarding breaches or defaults.
Working Capital:
Capital available for day-to-day operations of a business, often financed through invoice finance to manage cash flow.