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Terminology
When many prospects negotiate factoring and invoice discounting
packages they focus on the headline costs and the level of funding
they are anticipating, not fully understanding the jargon used.
This can be a major mistake as some of the terms glossed over have
an impact on both costs and funding levels.
- Initial percentage - maximum amount of funding against
approved debts
- Approved debts - debtors the provider will fund
- Disapproved debts - debtors the provider will not fund,
various reasons credit limit, age, dispute and contra trading
- Concentration - the highest percentage of the overall
ledger that the provider will fund on a single debtor
- Minimums - the minimum service fee collected, regardless
of turnover
- Refactoring - an extra charge to chase late debts, usually
over 90 days
- Contract period - usually minimum 12 mths, but 24 mths
now appearing
- Notice period - usually 6 mths, negotiable
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