Factoring Dictionary

Agency Factoring: The type of factoring, in which the collection of the receivables, being assigned to the factoring company, is transferred to another company. Buyers are told therein to make their payments to this firm.

Receivable: The price of the goods being sold, or that of the services being rendered by the client.

Receivable Notification Form: The document, in which the receivables (invoices) being assigned by virtue of the factoring contract are itemized.

Factoring with Notice: The type of factoring, in which the client firm announces its buyers that, it has transferred its receivables arising from the respective future sales to the factor. The assignment notice is submitted by the client in writing to the buyer, in response to which buyer’s confirmation letter is received. An assignment note is affixed on each drawn-up invoice.

Factoring without Notice: The type of factoring, in which the Seller Firm does not notify its buyers that it has transferred its receivables arising from its forward sales to the factor, and in which the collections are made by the seller firm, while the factoring company only renders guarantee and finance services.

Debtor: Real and legal persons to pay the price of the goods, or services, which they bought from the client.

Trading Volume of the Debtor:  Maximum invoice amount, which may be assigned for each debtor of the client.

Factor: The one who takes over the receivables of the client, and to whom the said are assigned by virtue of factoring contract.

Factoring Commission: Commission being received by the factor over each invoice.

Factoring Contract: The contract which is entered by and between the client and factor, and which determines the conditions and the legal framework of the factoring transactions in question.

Factoring Fee: Amount of interest to accrue monthly from the prepayment.

Invoice Discount: The type of factoring, in which the buyers are by no means notified with regard to the payment of its receivables arising from its forward sales to the factor, while the receivables in question are followed-up, and collected only by the seller firm. Factoring company only renders finance service.

Guarantee Limit: Maximum guarantee amount being allowed by the factor to each debtor.

Funds in Use: Total of the amounts related with the invoices, prepayments of which have been made, but the collection of which has not been made yet, plus the factoring commission, factoring fee, and other expenses.

Limit Approval Notification: Notification of the client from the limit of the guarantee being allocated by the factor on the debtor basis.

Client: The seller who utilizes the factoring service.

Average Maturity: The average collection period as per the invoices / receivables, having been assigned to the factor.

Prepayment: The cash payment being made to the client over the amount of the assigned invoice.

Reclamation: Commercial and legal flaws, reclaims, disputes, physical defects which may arise from the goods and services.

Factoring with Revocation: The type of factoring, in which the factor does not undertake the risk of nonpayment of the receivable in question. Only finance and collection services are given therein. In case that the receivables having been assigned to the factoring company are not to be paid by the buyer, factor is to revoke to the seller firm, and demand therefrom refunding of the prepayment it has made to the seller firm.

Factoring without Revocation (Irrevocable): Type of factoring, in which the factor undertakes the risk of nonpayment of the receivable in question totally within the determined limit. In case when future receivables may not be paid by the buyer due to payment difficulty, factor will not only be unable to revoke to the seller firm, and demand the refunding of the prepayment it has made to the seller firm, it will also make balance payment, if the seller firm is to have any receivable even after the deduction of the respective factoring commission, factoring fee, and the respective banking charges. In case the seller firm will decide not to benefit from the finance service, total of the amount of the invoice within the scope of the guarantee is to be paid to the seller firm on the 90th day as from the maturity date, after having the respective factoring commission and banking charges deduced therefrom.

Seller Information Form:  The document which indicates the sales prices and conditions of the client’s goods or services.

Assignment Stamp: The note, which is affixed on the invoices assigned to the factor, confirming the fulfillment of the assignment, and indicating the place of the payment.

Bulk Factoring: The type of factoring, in which the seller firm transfers all its receivables, arising from its sales to numerous small-scaled customers, and the said customers are instructed to make their payments in question to the factor. In this method, the collection of their receivables, as well as the provision of finance to these receivables is fulfilled by the factor at regular intervals.

Maturity Factoring: The type of factoring, in which the factor makes the payment of the receivables, having been assigned to it by way of adding certain number of days to the maturity dates applied by the seller firm to the related buyer firms, to the seller firm irrevocably without waiting for the collection of the said receivables, and without applying any factoring fee thereunto. It is done for the purpose of guarantee and collection.


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