Advance Rate
Amount expressed as percentage of approved invoice value which will be paid out or advanced immediately after raising the invoice

Approved debts
The invoices that a lender is willing to lend against. This will exclude things such as disputed debts, high risk customers and customers with a ban of assignment clause in their terms of sale.

Asset based lending
Encompasses funding against debtors in the form of factoring or invoice discounting, and can incorporate an element of funding against stock, property, existing plant and machinery. Also includes hire purchase and leasing products to fund assets in the form of new plant, equipment and vehicles. Can be extended to cover the funding of payroll specifically for recruitment agencies.

Asset Finance
Asset finance enables companies to obtain funding for the purchase of assets they need to run & grow their businesses successfully in exchange for a security interest in those assets. Paying cash outright for capital assets can be a significant drain on a company's working capital. With asset finance you will ease your cash flow through regular payments over an agreed period of time.  The most common kind of asset financing is to extend loans to purchase company cars, vans, machinery and equipment.

Assets
Anything owned by your company that has a monetary value, including debtors.

Assignment (of invoices)
The legal process whereby the lender obtains the right to collect the money due directly from your debtor to repay the amount advanced in respect of the invoice.

BACS
Bankers Automated Clearing System; funds may be transferred from one bank account to another via this payment system in 3 working days.

Bankruptcy
This is where an individual is unable to pay their creditors and proceedings have been taken through the Court to have that individual made bankrupt.  The effect of the bankruptcy order is that their property vests in a Trustee.  It is the responsibility of the Trustee to identify and realise the assets belonging to the individual and to distribute them amoung the creditors.

CHAPS
Clearing House Automated Payment System; funds may be transferred from one bank account to another via this payment system in on the same day.

Cost of funds
The interest rate you will be charged on the money lent to you (usually expressed in amount over bank base rate).

Concentration
The value of your sales ledger expressed as percentage accounted for by your biggest client or clients.

Credit Insurance
This provides a level of bad debt protection against non payment by your customers under certain specific circumstances. Policies may be purchased on a "stand alone" basis or are sometimes offered as an integral part of a "non recourse" facility.

Credit Limit
This is a limit you set for the amount of credit that you are prepared to extend to any of your customers. A lender’s limits are the levels of credit applied to each of your customers up to which they are prepared to advance money (funding limits). These limits may not necessarily be the same.

Current Assets
Cash, debtors, stock or anything that you would expect to convert into cash within twelve months of your balance sheet date.

Debt
A liability or obligation in the form of bonds, loans, mortgages or overdrafts owed to another person or persons and required to be paid by a specified date (maturity).

Debt finance
Financing by entering into bonds, loans, mortgages or overdraft agreements.

Deed
A document, which legally transfers ownership of property from one party to another, most commonly related to real property.

Deed of covenant
A legal document which records the obligation of one individual to pay a specified sum to another for a specified number of years.

Dilution
Anything which can reduce the value of invoices that you have already raised (such as credit notes).

Direct lease
You identify the asset and negotiate the price and arrange for us to buy it from the manufacturer (if new) or the previous owner (if used) to lease it to you

Disapproved Invoices
Disapproved invoices are those invoices which are excluded from the availability of funds calculation and cannot be drawn against.  Some of the main reasons why an invoice may be disapproved are:

• The invoice is disputed or in query with the customer (e.g. non delivery or faulty goods)
• The customer is not in a position to pay and the debt is deemed uncollectible
• The invoice is “aged” and has remained unpaid beyond its recourse period (typically 90 days from the date it was raised)
• The customer’s balance exceeds the credit limit or concentration limit agreed
• The invoice is in a category which may have been made specifically ineligible for funding under the agreement

Discount
The interest deducted prior to advancing or lending money against outstanding invoices.

Economic Life
The period of time during which an asset has economic value and is usable

Equity
Ownership interest in a firm.

Equity finance
Financing by selling ordinary shares or preference shares to investors.

Factoring
Advance of finance against unpaid, outstanding sales invoices by a factor (factoring company). Some degree of credit management is also built into the facility. Facilities can be structured so that the credit risk remains with the business or is passed on to the factor.

Factoring charge
The service charge levied by the factor expressed as a percentage of your gross invoice value

Fair Market Value
Price at which an asset is sold and bought in the open market.

Fixed Assets
Assets held for use by the business rather than for sale or conversion into cash, e.g. buildings and large items of fixtures and fittings or equipment.

Freehold
The permanent ownership of land or buildings which can be legally passed on to heirs and the most usual form of ownership for houses.

Ground Rent
Rent payable by the owner of a leasehold property to the freehold owner.

Initial percentage
see Advance Rate

Initial pre-payment (IPP or IP)
see Advance Rate

Invoice discounting
Financing by raising funds against unpaid outstanding sales invoices. No intervention into current credit management systems and not visible to the customer/debtor.

Landlord
A property owner who rents it to another party called a tenant.

Lease
Contract in which we purchase the asset selected by you and convey the use of that asset to you for a specific period of time at a predetermined rate.

Lease rate
The periodic payment to us for the use of the asset. The lease rate is primarily determined by the total cost of the asset, the duration of the lease and the interest rate level.

Leasehold Land
Land which is rented from the owner for a specified term under a lease. At the expiry of the term the land reverts back to the owner.

Lessee
The lessee is the user of the asset being leased, i.e. you.

Lessor
The lessor is the party who finances the purchase of the asset and has legal or tax title to the equipment, grants the lessee the right to use the equipment for the lease term, and is entitled to the periodic payments, i.e. the leasing company, us.

Liquidation
The procedure under which a company is dissolved (or wound up).  The function of a liquidator is to convert the assets of the company into cash which is then distributed among the creditors to pay off (so far as possible) the debts of the company.  Any surplus is then distributed to the members.  These procedures are all legislated by the Insolvency Act 1986 (as amended).

Master lease
A contractual arrangement which allows you to lease other assets under the same basic terms and conditions without negotiating a new contract.

MBI
Management buy in. New management team buys into the business acquiring either the shares or the business assets.

MBO
Management buy out. Where the existing management team are looking to buy the shares or assets from a parent company, or non-group company.

Merger
The combining of two or more entities into one.

Non-recourse facility
Advance of finance against unpaid outstanding invoices in which the credit risk is passed over to the finance company. A non-recourse facility comes with credit insurance meaning you don't have to pay back advances in the event of bad debts. Non-recourse agreements tend to be more restrictive when looking at funding decisions, and more expensive than recourse facilities (see also 'Recourse')

Peppercorn Rent
A nominal rent intended to demonstrate that a property is leasehold and not freehold. It may be as little as one peppercorn (or nominal sum of money) per year.

Purchase option
A provision by which you have the right to purchase the asset at the end of a lease term, either at a predetermined amount or its fair market value.

Reconciliation
A process of matching the balance of your sales ledger to the balance recorded by the Lender at the same point in time; this is typically undertaken at the end of each month.

Recourse facility
Advance of finance against unpaid outstanding invoices in which the credit risk remains with the company. You would have to pay back advances in the event of bad debts (see also 'Non-recourse').

Refinance
Paying off an existing loan with the proceeds from a new loan, usually of similar size but on better terms and/or with a new lender. In order to decide whether this is worthwhile, the savings in interest must be weighed against the fees associated with refinancing.

Restructure
Reorganisation of the current business structure to increase efficiencies, realise synergies or account for changes in strategy or the marketplace. This may involve both the business itself as well as the finance.

Residual value
The resale value of the asset at the end of the lease.

Sale and Leaseback
A situation whereby a property is sold by its owner to another person or company on condition that the purchaser leases the property back to the original owner for an agreed rent over a set term. This enables the original owner to raise capital which can be used for other purposes.
 

Stamp Duty
A tax imposed on the buying of shares and property. As far as shares are concerned, the tax is collected by brokers on behalf of their clients, and appears on the contract note which they send out to clients when they buy shares.

Currently, stamp duty on share purchases applies at the rate of 0.5%. Note that it only applies to purchases and not to sales. Private investor groups and brokers are lobbying for the abolition of stamp duty. They note that there is no stamp duty in the USA which makes it cheaper to trade there and that, in an international market of online trading, UK brokers could lose out to American-based brokers.

Stamp duty on property purchases applies on a sliding scale according to the purchase price. For property over £60,000 it is 1%, over £250,000 it is 3%, and over £500,000 it is 4%.

In November 2001, the government raised the first band to £150,000 for 2,000 deprived areas in the UK in a bid to encourage investment.

Take on
The value of the ledger at the point when the facility with a Lender commences. These debts will be "taken on" when the facility starts and will be used to create the initial availability.

Tenant
A person who occupies land/property on a lease basis.

Trade Finance
Finance to help purchase goods from suppliers. Once a confirmed order from a creditworthy buyer exists, the trade finance company funds the required purchase from the supplier

Turnaround
A sharp, positive reversal in the performance of a company or the overall market.

Useful life
see economic life

Working Capital
Current assets less current liabilities, representing the funds available to finance new stock, debtors, and work in progress.