Wondering how receivables factoring can aid in your cash flow management? Discover that – and much more – in this helpful glossary.

Bad Debt: Any debt that is delinquent and has been written off as uncollectible.

Balance Sheet: A financial statement that shows a business’ current financial condition. It lists assets, liabilities and net worth. On a balance sheet, assets are equal to liabilities plus net worth.

Balloon Payment: The balance of principal that is due and owing in its entirety at a specified point in time; this time must be less than the time required to fully amortize the debt.

Bankruptcy: A state of insolvency of an individual or organization or the inability of a person or business to pay their debts.

Beneficiary: The person or party entitled to receive the benefits of an assignment of collateral.

Bill of Lading: A shipping document that gives instructions to the company transporting the goods.

Bill of Sale: A document used to transfer the title of certain goods from seller to buyer.

Broker: An individual who pairs clients in need of cash or services with appropriate financial entities, including factors.

Cash Flow/Cash Flow Management: The flow of cash through a business or household. In business terms, cash flow involves the flow of cash into a company in the form of revenues and out of the company in the form of expenses; receivables factoring can aid in cash flow management.

Charge Back: An amount of money owed to the factor or “charged back” to the client when the factor is unable to collect the account receivable that was factored, based on an agreed upon debtor non-payment clause in the receivables factoring contract. The factor will typically withhold an amount out of a reserve release or an advance.

Chattel mortgage: A mortgage on personal property, given to secure a debt. Typically used in the sale of a business and also known as a security agreement.

Client: The business that sells its accounts receivable to the commercial receivables factoring company; also known as the account creditor.

Collateral: Anything of value (accounts receivable, inventory, machinery, equipment, real estate, etc.) pledged as security to ensure re-payment of an obligation. Collateral is promised to a funding source until funds are repaid. If the obligation is not repaid, the funding source has the right by law to seize the collateral.

Collectability: Refers to the funding source’s ability to collect future income stream payments once they are purchased.

Commission: Fee paid to a broker for executing or referring a cash flow transaction.

Concentration: When a large percentage (usually 15% or greater) of one client’s accounts receivable is due from a single customer.

Corporation: A legal entity, chartered by a U.S. state or the federal government, and separate and distinct from the persons who own it. It is regarded by the courts as an artificial person; it may own property, incur debts, sue or be sued.

Credit: A privilege granted for the purpose of extending time to make payment on a debt.

Credit Analysis: This is the process of analyzing the records and financial affairs of a business to determine its creditworthiness as a potential client or account debtor.

Creditor: Refers to the party or business to which money is owed.

Customer: The entity that owes money to the client and will ultimately pay the receivables factoring company for invoices purchased; also known as the account debtor.

Still have questions about cash flow management? Call MP Star Financial at 1-800-833-3765, ext. 150 or email us with your questions about receivables factoring today.