Cash Advance Terminology

Eddie Davis -

The following is a list of terminology common to the lenders in the FINSYNC marketplace. If you come across a term that should be included, please post a comment below.

 

Advance Rate - The Advance Rate is a percentage of the invoices you submit which can be given to your company immediately. The Advance Rate plus the "Reserve" sum to 100%.

Chargeback - A Chargeback is a policy where the lender can require an advance to be repaid immediately.

Facility Fee - A Facility Fee is a fee for administering the cash advance relationship.

Factoring - Factoring is a term where a business sells its rights to future customer payments in exchange for a fee. Typically, an Advance is paid from the Purchaser to the Seller immediately and then when the customer finally makes payment, the purchaser and seller split the final payment.

Invoice - Cash advances are secured against invoices. The Seller chooses which invoices to sell and receives and advance on those invoices only.

Maximum Credit Facility - The maximum credit facility is the dollar cap for all invoices that have been sold but not yet paid yet. Once the maximum has been reached, no further invoices may be sold.

Minimum Monthly Sales - Minimum Monthly Sales is a term of your agreement and does not mean a minimum amount of sales that your company makes to your customers but rather the minimum amount of invoices to be sold to the purchaser per month. The contract may have a minimum of $0.00 meaning you don't have to sell invoices each month at all.

Personal Guaranty - Some lenders require that you personally guaranty repayment in the event that your customer does not make payment and your business is unable to make payment.

Purchase Fee - The Purchase Fee is the percentage of the invoice that will kept by the purchaser when your customer makes payment. It is subtracted from the reserve with the balance coming to you in a second payment.

Purchaser - The purchaser is the financial partner that advances your company money. You are the seller.

Receivable - Receivable is an accounting term for the right to collect money in the future. Your cash advance might be against a receivable, an invoice that a customer of yours has yet to pay.

Remittance Advice - Remittance Advice is the instructions your customer receives for making payment. If you have sold your invoice through FINSYNC, your customer must make payment by either ACH through FINSYNC or by mailing a check to FINSYNC's lockbox.

Reserve - The Reserve is the amount of money that is not advanced to you. When the customer makes payment, the reserve will be split between the purchaser (to cover their fees) and your company receiving the balance of the Reserve.

Seller - When you receive an advance through FINSYNC, you are the Seller as you have sold the right to collect money from your customer on your invoice.

Term of Offer - The Term of Offer is the time period during which you are authorized to sell invoices to the Purchaser. It is established in the agreement before any advances are made and there may be a clause for automatic extension.

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