Invoice Finance – Jargon Buster

The jargon buster is here to help you understand the more technical terms in the invoice finance market.

We hope this page helps you better understand the product, but if you do have any questions on any of the below or in general, give us a call on 01827 300310 and we will be happy to help!

Definitions are as follows:

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.