Invoice Finance – Jargon Buster

The Invoice Finance world uses a variety of terms and acronyms, often making understanding some of the ins and outs a little tricky.

Our blog below unpicks and unpacks the most commonly used terms in the world of Invoice Finance!

1. All Assets Debenture – A charge over the business to protect the lender in the event of business failure or non-payment of invoices.
2. Arrangement Fee – This is the fee to set up the facility, covering the initial administration and credit checks.
3. Bad Debt Protection – A type of insurance usually associated with an invoice finance facility which protects you against non-payment from your debtors.
4. Contract Period – This is the total length of your contract with the lender.
5. Credit Limit – The maximum amount you can borrow against a particular customer.
6. Customer Concentration/High Involvement – The percentage of a ledger which can be one single customer.
7. Debtor – A company who owes you monies for completed work.
8. Discount Fee – An annual rate of interest against amount borrowed.
9. Funding Limit – This is the maximum amount of funding you can borrow at any given time.
10. Invoice Discounting – This product is a funding only facility, whereby you handle your own credit control internally.
11. Invoice Factoring – This product allows you to draw funds from the facility, whilst the provider handles your credit control for you.
12. Invoice Finance – Invoice finance is a broad term for any kind of financing service which uses a businesses’ outstanding invoices as security to advance cash, up to an agreed amount.
13. Lender – The Invoice Finance company that provides the facility for you.
14. Minimum Fee – The minimum cost of the facility (Typically over a 12 month period).
15. Personal Guarantee – A contractual agreement between a borrower and a lender where the borrower will individually guarantee to fulfil all or certain obligations under the agreement should the borrower default.
16. Pre-Payment Percentage – This is the maximum amount that will be lent against a single invoice or ledger.
17. Recourse/Approval Period – This is the number of days that the funding will be provided for.
18. Refactoring – The fee charged for invoices which go over the recourse/approval period.
19. Sales/Debtor Ledger – All outstanding invoices due back to yourselves for completed work.
20. Service Fee – This is a percentage charged against the total value of invoices you put forward for funding.
21. Selective Invoice Finance – This product lets you release funds on individual customers, meaning you don’t have to commit your full ledger.
22. Spot Factoring – This product allows you to draw funds from individual and one off invoices.

You can always contact us for more information on invoice finance on either 01827 300310 or info@shireinvoicefinance.co.uk. Alternatively, fill in the contact form and we will get in touch to discuss your query.