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"A" credit customers:
Consumers with impeccable credit, who can obtain a loan from traditional lenders.
Acceleration Clause:
Language in a lease that secures payments for the full term of the lease.
Account:
A compilation of all claims, invoices and payments incurred by a particular debtor for merchandise sold or services rendered in the ordinary course of business.
Accounts Payable:
Amounts owed on an open account to creditors for goods and services.
Accounts Receivable:
A collection of a company's outstanding invoices (invoices which have not yet been paid by the company's customers).
Accounts Receivable Aging Report:
A report showing how long invoices from each customer have been outstanding.
Accounts Receivable Financing:
Obtaining a loan by pledging accounts receivable to a lending institution as collateral security for the loan.
Advance Rate:
The percentage of the face amount of an income stream that a funding source will advance to a client.
Advance Factoring:
The factor will pay for the Accounts Receivable in advance of receiving payment from the customer. Factor provides a "cash advance" for the receivables.
Amortization:
The gradual, systematic payment of a debt, such as a mortgage or other loan, in installments of principal and interest for a definite time, so that at the end of that time, the debt will have been paid in full.
Articles of Incorporation:
A document filed with a U.S. state by the founders of a corporation. After approving the articles, the state issues a Certificate of Incorporation; the two documents together become the Charter of Incorporation.
Asset:
Anything having commercial or exchange value that is owned by a business, institution or individual. A business' assets might include its real estate, equipment inventory, intellectual assets such as copyrights or trademarks, and accounts receivable.
Asset-based Lending:
A form of revolving credit collateralized by a business's assets.
Assignability:
The ability to assign (or sell) an income stream to another individual or business.
Assignee:
The person or business entity who is given, obtains, or buys the right to an asset.
Assignment:
The transfer of the rights, title or interest of any debt instrument that is properly owned by another party.
Assignor:
The person giving or selling an asset, and subsequently, forfeiting rights to that asset.
Authorized Signatory:
The person who is empowered to execute and to bind a document or legal contract on behalf of a corporation, partnership or other entity.
"B" through "D" credit customers:
These consumers have less than perfect to bad credit and usually cannot qualify for traditional financing. Also called sub-prime credit customers.
Bad Debt:
Any debt that is delinquent and has been written off as uncollectible.
Bad Debt Reserve:
A reserve of funds held back by a funding source, when purchasing an income stream, to offset its losses due to non-payment of the purchased income stream. Once the reserve reaches a predetermined size, sufficient to protect the funding source's investment, part of hte reserve will be funded back to the client. Nost often used when factoring accounts receivables, purchase orders or contracts.
Balance sheet:
A financial statement that shows a business' current financial condition, with assets on the left side and liabilities and net worth on the right side.
Balloon:
The balance of principal that is due and owing in its entirety at a specified point in time, but in any event, less than the time required to fully amortize the debt.
Bankruptcy:
A state of insolvency of an individual or organization. The inability to pay debts.
Beneficiary:
The person or party entitled to receive the benefits, or proceeds, of the life insurance policy upon the death of the insured person.
Bill of Lading:
A shipping document which gives instructions to the company transporting the goods.
Cash Flow:
The amount of cash received from an investment, occupation or financial resource (such as an income stream) which is then available to the recipient for other purposes.
Chattel mortgage:
A mortgage on personal property, given to secure a debt. Typically used in the sale of a business. Also called a security agreement.
Collateral:
Something of value (land, a home, a car, etc.) that is pledged as security to ensure the payment of a debt. Collateral is promised to a lender until a loan is repaid. If the borrower defaults, the lender has the right, by law, to seize the collateral.
Collectibility:
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.
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.
Creditor:
One who is owed payments on a debt by a debtor.
Current Ratio:
Debt instrument:
Future payment or series of payments, or a debt that one party owes to another party. Also known as income streams or cash flow instruments.
Debtor:
One who owes something and makes payments to a creditor.
Debt-To-Equity Ratio:
A return of investment; an investment created by a form of debt, i.e., bank loan, investor funds, etc., of which is convened to profit then retained in earnings which is referred to as "owner" or "stock holder" equity.
Default:
The omission or failure to perform or fulfill a legal duty, obligation, or promise (i.e. to pay a debt).
Disclosure:
To tell your investor anything that may be relevant and of material nature to the deal.
Due diligence:
Exhaustive research on a transaction, income stream, client, and/or payor. Due diligence may involve credit checks, appraisals, UCC searches, lien searches, or on-site visits with clients.
Encumberance:
A lien or any form of indebtedness owed against real or personal property. An encumberance is also recognized as unearned equity.
Equity:
The value or interest an owner has in property over and above any indebtedness owed on the property.
Escrow:
The system by which money documents, personal property, or real property is held in trust for another party by a disinterested third party until the terms and conditions of the escrow instructions are completed or terminated.
Face value:
The value of a bond or other security as stated on the certificate or instrument. Face value is also referred to as par value or nominal value.
Factor:
A funding source that specializes in funding accounts receivable.
Factoring:
The purchase of a business' accounts receivable at a discount.
Foreclosure:
A legal proceeding in court to seize property given as security for a debt that is in default.
Funding source:
An individual investor or an investment company that buys income streams.
Future Value:
The amount of principal that will exist in the future.
Hypothecation:
Borrowing funds from a lender, investing those funds in a debt instrument, and giving the lender a security interest in the debt instrument as the collateral for the loan.
Institutional lenders:
Savings and loan associations, local and regional banks, mortgage companies, finance companies, and commercial lenders.
Intangible personal property:
Something that has value but is not a tangible asset, for example, a trademark, copyright, patent, or trade secret.
Investment-to-value ratio:
A measure of how secure a creditor's position is and how likely the creditor is to recoup all of his or her money in the event of a foreclosure.
Joint venture:
A business entity established for a specific task, operation, or goal.
Lease:
A contract in which one party conveys the use of an asset to another party for a specified period of time at a predetermined rate.
Lessor:
The individual or company that owns the equipment being leased to a lessee or user.
Leverage:
The ratio of debt to total assets.
Lien:
A hold or claim which one person has upon the property of another as a security for some debt or charge.
Line of Credit:
An amount of money a borrower may obtain from a bank without a special credit check. The money is generally for business purposes, and the amount would not include the borrower's own home loan or other personal, secured loans.
Limited Liability Company (LLC):
A form of business structure designed to combine the best of corporate and partnership attributes into one entity.
Loan-to-value ratio:
A measure of how heavily mortgaged a property is and how likely the owner is to default on his or her debts.
Market value:
The price at which a ready, willing, and informed person would buy something; the price property would command in the current market.
Mortgage:
A written instrument that creates a lien by pledging real property as security for a debt.
Non-Recourse Agreement:
If the client's customer does not pay the factor within a specified period of time, the client is not responsible for indemnifying the factor.
Note:
A written promise to pay a specified amount to a certain entity on demand or by a specified date.
Owner financing:
A type of financing in which the seller of a tangible item accepts a promissory note as a portion of the purchase price. Also called seller financing.
Partnership:
A common form of joint ownership of a business.
Payee:
Person or business that has the right to receive a payment or series of payments and is interested in selling that income stream for cash. (Also called the seller or client.)
Payor:
The person, company, or government responsible for making payments on an income stream.
Personal Guaranty:
A contractual agreement between a funding source and a seller, whereby the seller assumes personal responsibility and liability for the obligations of the income stream.
Portfolio:
A group or package of income streams of the same type.
Privately held:
Owed to a private individual or business rather than to a bank or other financial institution.
Profit and loss statement:
A financial statement that shows a historical record of a business' income and expenses.
Promissory note:
A written promise to pay a specified amount to a specified party over a certain period of time.
Quick Ratio:
Ability to convert to cash quickly; current assets less inventory current liabilities
Rate of Return:
With regard to Corporate Finance, the rate of return is the return on equity or the return on invested capital.
Replevin:
A legal proceeding in court to seize property (other than real estate) given as security for a debt that is in default.
Reserve:
An amount a funding source holds in its account to cover potential payment defaults. After a certain time period has passed, the funding source rebates the reserve to the client less any fees or charges for delinquency. Also called a bad debt reserve.
Satisfaction:
The discharge of an obligation by paying a party what is due (i.e., the satisfaction of an IRS lien or the satisfaction of a mortgage).
Seasoning:
The length of time payments have been made on a note or other debt instrument.
Secondary market:
The marketplace where individuals and businesses can sell privately held income streams to funding sources for cash.
Securitization:
The bundling and resale of debt instruments to investors; permitted only for parties licensed and regulated by the SEC.
Security interest:
An interest in property, other than real estate, which is given as security for a debt or other obligation. A security interest is created by execution of a security agreement and one or more financing statements under the Uniform Commercial Code.
Seller:
The person or company that is holding a debt instrument and wants to sell it.
Servicing:
The collection of payments of interest and principal, and trust fund items such as fire insurance, taxes, etc., on a note by the borrower in accordance with the terms of the note. Servicing by the lender also consists of operational procedures covering accounting, bookkeeping, insurance, tax records, loan payment follow-up, delinquent loan follow-up and loan analysis.
Subordination:
The act of a creditor acknowledging in writing that a debt due him or her by a debtor shall be inferior to the debt due another creditor by the same debtor.
Time value of money:
Concept that addresses the way the value of money changes over a period of time.
Title commitment:
A commitment on the part of the insurer, once a title search has been conducted, to provide the proposed insured with a title insurance policy upon closing.
Title insurance:
Title insurance can benefit either the payor or the payee. Should the beneficiary suffer any damages due to clouded or false title to real estate, title insurance recompenses the damaged party to the extent of the damages.
Trial balance:
A spreadsheet that lists all loans in a portfolio and their payment schedule. Usually required for a portfolio transaction.
Uniform Commercial Code (UCC):
Standardized set of guidelines protected by law that set down how business transactions must be conducted.
Unseasoned:
A lease or note that has had few, if any, payments made.
Viatical:
The nature of viatical settlements is the assignment (transfer of life insurance benefits)and sale of a death benefit. In the beginning, viatical settlements were used primarily as a financial option for AIDS patients with a clearly terminal illness, who were unable to obtain the resources they need at a critical time, Eventually, victims of other terminal illnesses such as cancer and lukemia recognized the advantages of viating their life insurance policies to pay for current expenses.
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