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Glossary of Terms and Definitions

Abstract: A floating lien. An abstract is a filing that allows an individual or company to place lenders or appropriate concerns on notice that a debt is due but has not been satisfied.
Account Creditor: The individual or company which requests the asset-based loan and is generally the recipient of the cash from the lender.
Account Debtor: The individual or company that is liable for a debt created by the acceptance of goods or services from the account creditor
Account Receivable : A debt owed from an account debtor to an account creditor as a result of goods sold or services rendered.
Accounts Receivable Factoring: Purchasing the debt owed to an account debtor to a company.
Accounts Receivable Financing: A loan secured by the debt from an account debtor and other assets of a company.
Accrual Accounting Method: A form of reporting profits or losses based on the consummation of a transaction being accepted by form of contract or invoice without the realization of cash or an expense that has been incurred but has not yet been disbursed.
Adequate Notification: To notify an individual or company in a form that could not be misunderstood for its true intent and purpose. The notification is usually clear and decisive and lacks vague or ambiguous implications.
Aged Trial Balance: A detailed report which provides information on accounts receivables. This report provides information such as the invoicing date; the amount; the due date; payments made, if any; discounts taken, if any; shortages and credits. The conclusion of this report provides management with a grand total of cash receipts due or to be collected.
Angel Lender: An individual who provides funds in the form of a loan to someone of whom he is very close and generally does not require rules and restrictions of a formal lender. More commonly, an angel lender is a friend, family member or close acquaintance of the borrower.
Asset Based Lender: A company that makes asset based loans to businesses.
Asset-Based Lending: A loan to an individual or company collateralized by a specific asset or group of assets. Typically asset-based loans do not require real property as collateral.
Assignee: The recipient of an assignment. The individual or company who is to receive the goods and proceeds for cash or consideration previously granted.
Assignment: The rights of a contract or bond given to one person from another.
Assignment of Contracts: The transfer of one’s rights to another for the purpose of taking possession of the instrument or spirit of a contract. Usually when the assignment of a contract exists, it invariably includes the assignment of proceeds.
Assignment of Proceeds: The transfer of one’s rights to another for the purpose of taking possession of cash proceeds forthcoming. This does not constitute an assignment of contract as most people make this common mistake.
Assignor: The individual or company that issues the right to a lender as a result of cash or consideration granted to its borrower.
Availability: The difference between the outstanding debt and the remaining cash availability on the line of credit granted by the lender.
Bill of Lading: A certificate given to by a ship’s master to a consignor of goods.
Bill of Sale: A document that transfers ownership of an asset from one person or company to another.
Cash Accounting Method: A form of reporting profits or losses based on actual receipts of income and disbursements of expenses.
Cash Flow Financing:  A loan that is made to an individual or a company over a short period of time, typically 12 months or less.
Chattel Paper – A form of documentation that establishes the “essence of value”, a pink slip, a bill of lading, a bill of sale, etc. A document that could be converted to cash.
Collateral: The intangible or tangible property given as security to the lender by the account credit for any obligations and indebtedness of account creditor.
Concentration: Exceeding an established percentage (usually 25%) of one’s cash or liquidity in a single investment.
Conflicting Security Interest: Clouded title; two lenders holding the same collateral with the inability to determine who has priority.
Consignment: A form of providing tangible goods to a retail or wholesale outlet for the purpose of displaying and selling at will. Consignment does not constitute a perfected security interest in the product – it simply means that the product is the possession of the seller until sold.
Covenant: A rule, a law, a restriction prohibiting an individual or a company from performing unauthorized acts.
Credit Guaranty – A form of guarantying a debt from the debtor in the event of debtor insolvency.
Debit Consolidation Factoring: This service is designed to assist the growing company that is currently in default with his bank or other key creditors (including the IRS). This allows PBCC to assist in “debt negotiations” until such time all creditors are satisfied. Debt consolidation factors allow the company to increase cash flow without increasing debt.
Debt-to-Equity Ratio: A return on investment; an investment created by a form of debt (i.e., bank loan, investor funds, etc.) of which is converted to profit; then retained in earnings which is referred to as “owner” or “stockholder” equity.
Deficiency – A shortage; typically an amount received less than the contractual amount due and payable.
Discount Rate: A fee assessed by an individual or company that purchases an asset of another individual or company for cash or consideration.
Encumbrances: A lien or any form of indebtedness owed against real or personal property. An encumbrance is also recognized as unearned equity.
Estoppels: The act of being prevented from denying or asserting something on the ground that to do so contradicts what has already been admitted or denied either in words or by actions.
Factoring: The outright purchase of accounts receivable.
Factoring Company: A company that provides the service of factoring accounts receivable.
Float: The amount of time required to allow a demand note or a check to be converted to “hard cash” and made available to the recipient of such a note. Institutions refer to this as “in suspense” or “hold” status.
Foreign Corporation Permit: A permit granted by the Secretary of State authorizing an out-of-state corporation to conduct its business within that given state.

Hypothecate: A form of moving collateral or any negotiable instrument from a position of priority lien to a lesser position for the purpose of securing additional financing.

Insolvency – The inability to pay one’s debts and has lost the ability to create income or generate profits.
Internal Rate of Return: A return on an investment that is greater than the amount described in a contract or any other investment instrument. The internal rate-of-return is measured by the ability of the investor to reduce his internal expenses during the course of managing the investment; which means that the investor actually makes more than what is outlined in the contract or other investment instrument.
Invoice: An itemized list of goods dispatched or delivered to a buyer, with prices and charges.

Judgment: A ruling handed down by a court of law ordering an individual or company to make good on an obligation.

Levy: To take possession of an asset or to liquidate the asset for cash, for the purpose of satisfying a debt or judgment, on an obligation.
Lien – An attachment, either voluntary or involuntary. A lender will apply a lien to encumber real or personal property. The lien could be granted by form of an abstract judgment rendered by a court of law.
Line of Credit: Availability of funds by the lender based on the account debtor’s ability to pay.
Loan-to-Value: Based on current market value, the cash from the value of an asset less any liens or encumbrances.

Manifest: A detailed list of a ship’s cargo, submitted to Custom officers. This document describes the true owner of the goods, as a pink slip would show the true owner of a vehicle. This document is also referred to as chattel paper.

Non-Notification: An account debtor’s invoices are purchased by a factor, but the debtor is not notified of this fact.
Non-Recourse 1: Generally, accounts purchased by the lender remains with the lender. The lender accepts full credit risk for any and all accounts for which it purchases.
Non-Recourse 2: Factoring in which the factor assumes the liability of collecting the debt, and assumes the loss if it cannot be collected (there is no recourse to collect through the original owner of the debt).
Note: A written promise to pay a named amount to a particular company or business by a certain date.
Notification: Informing an account debtor that an invoice or invoices have been purchased through factoring and that the factor is to be paid directly.
Obligor: The account debtor. The individual or company that is liable for a debt created by the acceptance of goods or services from the account creditor.
Ostensible Authority: An individual that holds himself out to be one of authority to perform a duty of which the authority was never granted. Such person taking the ostensible authority he or she may have caused a lender to advance funds or act in a manner which would normally be considered inappropriate, if the lender was aware of the actual authority this individual possesses.
Overage: The amount of money received by the lender of which is unidentifiable, non-factored receivables or overpayment on invoices.
Payee: The entity that sells a future income at a discount for cash (as in a business cash advance).
Payor: The entity responsible for making payments on a debt.
Perfected: A fully executed lien or encumbrance in accordance with the laws of the State in which the loan was granted.
Performance Guaranty: An “assurance” that if the duties prescribed by a contract are not performed, the guarantor assumes responsibility for the contract’s completion.
Personal Guaranty: A legal document that stipulates that the seller of a future income (such as accounts receivable) guarantees to the funding source (such as the factor) that the income will be paid.
Personal Property: Assets that belong to an individual or company that can only be pledged as security by virtue of a UCC-1 Financing Statement.
Pooled Collateral: A form of security provided to a lender for the purpose of a short term or long term loan. Assets are grouped together and pledged to the lender for a single loan.
Post Pention “Chapter 11” Financing/Sale Lease: This service is for the company that is presently in Chapter 11 Bankruptcy. Upon court approval, PBCC can provide “instant cash” on receivables, combined with instant cash on equity in existing equipment if needed.
Priority Lien – First position; the senior lender in a transaction.
Promissory Note: A legal document stating the amount(s) one party pledges to pay to one or more others within specified future dates.
Purchase Money Security Interest: A transfer of one’s rights to another by virtue of a cash payment or some form of consideration. This is typically done between lenders and perfected under the Uniform Commercial Code.
Purchase Order Financing: Advancing funds to purchase goods that will be paid back by financing.
Real Secured Property: Real estate collateral that can only be perfected by a note and a Deed of Trust.
Real Property: Real estate.
Rebate: The return of funds issued to the client by a factor from the reserve account.
Rebates: A bonus paid back to the account creditor as a result of prompt paying receivables.
Receivable Factoring: See Accounts Receivable Factoring.
Receivables Financing: See Accounts Receivable Financing.
Recourse: An established time frame (usually 61 days) in which non-performing invoices will be returned to the account creditor for payment to the lender.
Recourse: In a factoring arrangement, the seller of a future income pledges to pay the income amount to the factor even if the account debtor (who owes the income to the seller) does not pay.
Reserve Account: An account established by the factor to track funds owed to a client as factored invoices are paid. The account amount equals the invoice face value minus the advance, the factor’s fees, charge backs and administrative charges.
Reserve: Funds held by a loan source or factor to cover potential payment defaults. After a certain amount of time or when the principal repayment is satisfied, the reserve is rebated to the loan or cash advance recipient.
Reserves: The amount generally held by a lender over and above the principal amount advanced, usually 20% of the gross amount. This is held for the purpose of covering non-performing invoices.
Schedule of Accounts: A report from the loan or merchant cash advance recipient to the lender or factor listing accounts’ status on which future income has been purchased at a discount.
Seasoning: Amount of time on which payments have been made on a debt.
Security Interest: A creditor that holds a perfected right or lien in an individual or company’s existing assets, either in part or entirety.
Security Interest: An interest in property, other than real estate, which is given as security for a debt.
Security: Valuable assets offered as collateral to secure repayment of a debt.
Servicing: Collection and disbursement of all payments on a note as stipulated in the terms of the agreement, plus the operational business activities required to administer the process, e.g., accounting.
Sliding Scale – A time frame (usually in 15 day increments) of which a lender incrementally increases the amount of fees assessed on each outstanding receivable.
Specific Collateral: A single form of security provided to a lender for the purpose of a short term or long term loan. Specific collateral includes items such as an automobile, a piece of equipment or inventory.
Subordinate: To assign one’s collateral position, whether in full or in part, to another to exchange one’s security interest over another.
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.
Superior Lien: A lien that is issued by a Federal Court. Generally, the Federal Court issues superior lien rights to the lender during the course of post-bankruptcy petition financing. If approved, the Federal Court will place the lender in front of all other creditors with the intent to benefit all the creditors.
Tangible Personal Property: Personal property other than real estate that may have value that could be used as collateral or repayment of a loan.
Term Loan: A loan that is made to an individual or a company over a long period of time, typically 12 months or more.
Trial Balance Printout: A list of all accounts in a portfolio, including loan amounts, payment schedule, and status. Usually required for a portfolio transaction.
UCC: Short for Uniform Commercial Code. UCC is the lawful code mandated by the State, which sets forth the rules and provisions of a perfected security interest.
UCC:1 (Financing Statement): The document filed with the Secretary of State and/or the County Clerk’s office(s) to perfect a factor’s lien on a clients’ assets (accounts receivable).
UCC: 2 (Statement with Respect to Change): The document that is filed with the Secretary of State and/or the County Clerk’s office(s) as evidence of an assignment, release or change in the UCC-1. In the case of factoring, a UCC-3 is filed to terminate a UCC-1 when all outstanding invoices are paid.
Uniform Commercial Code: The State Code which regulates the transfer of property.
Unperfected Assignment: The rights given from one person to another; however, the assignment is improperly documented and recorded.
Unseasoned: A lease or note that has had few, if any, payments made.
Verification: A step during the due diligence process in which a factor confirms the validity of an invoice.
Warranty: An undertaking by the person insured that a condition of the receivables is as stated or will be exactly fulfilled.