There are a number of technical terms used in connection with factoring which you might not understand when you first encounter them. To aid your understanding, we have provided you with a list of terminology, which includes the most commonly used technical and financial terms.
the funds advanced to the client against its invoices, paid into the client’s bank account.
by approving a given buyer, BNP Paribas Factor agrees to take charge of the buyer’s receivables under the terms and conditions of the factoring contract. The approval may include a funding limit (see approval ceiling).
total value of invoices due, secured or not, and not yet paid.
Taking charge of invoices involves purchasing the receivables from the client. No funds are advanced at this stage.
a company that has entered into a factoring contract with a factoring company.
maximum amount of the outstanding used that can be financed by the Factor.
total value of invoices purchased by the Factor and not yet paid by the buyers.
this offer is based on the periodic assignment to the Factor of the total value of a client’s receivables, in consideration for which the client gains protection against the risk of insolvency and receives the finance it needs to fund its production cycle. This offer funds a company’s inventories and as such it is regularly updated.
this offer is based on the periodic assignment to the Factor of the total value of a client’s receivables, in consideration for which the client gains protection against the risk of insolvency and receives the finance it needs to fund its production cycle. This offer funds a company’s inventories and as such it is regularly updated.
Basel Committee recommendations that require banks to adhere to a certain number of ratios, including a minimum value of the ratio of their equity to weighted credit risk, market risk and operational risk.
Syndication involves a group of banks. The group of banks appoint a “lead bank”, which arranges and manages the syndication of the loan. The lead bank assesses the borrower’s creditworthiness and assigns portions of the loan to the other banks in the syndicate. The lead bank usually proposes more than one tranche of financing, to structure a company’s debt. In connection with a factoring contract, syndication is used, in certain cases, to spread the risk.
total amount of bills received whose due date has not yet been reached.
BNP Paribas group subsidiary, purchased at the end of 2017, with turnover of €51.4 billion. BNP Paribas Factor provides its clients with a unique offering thanks to its full range of services in France and abroad. Within eight hours, BNP Paribas Factor provides funds to companies of all sizes and sectors against their invoices... because a company should not have to waste time on managing its invoices. Factoring becomes simple, online and modern. For the past five years, BNP Paribas has been voted “Best import-export Factor” by FCI (Factors Chain International).
amount of receivables in respect of a buyer above the guarantee ceiling.
centralised cash management, enabling a group to balance its subsidiaries’ accounts, thereby reducing financial charges arising from market imperfections.
Compagnie Française d’Assurance pour le Commerce Extérieur, or COFACE, is a company, overseen by the French state, whose purpose is to manage the fundamentals relating to the guarantees linked to businesses’ international development.
commission calculated pro rata to the amount of the promissory note issued by the Factor.
the buyer is not informed of the existence of a factoring contract between its supplier and the factor.
legal arrangement whereby the title of your invoices is transferred to the Factor (articles 1249, 1250 et seq. of the Civil Code).
judicial proceeding ordered by a French court against a company that has ceased to make payments. The purpose of the is to enable the company to continue trading and settle its liabilities according to a plan.
court judgement resulting in the immediate (or within a short period of time) dissolution of a company.
policy insuring companies against the risk of non-payment of their trade receivables.
a transaction whereby receivables are assigned to credit institutions, established by the Dailly Act. Collection of receivables in the form of dematerialised trade bills, transfers, deferred electronic payments. In France, most banks perform Dailly assignments. Dailly assignments are a financing technique frequently used by companies in France.
account opened by the client, in the books of the Factor, in which the account entries concerning it are recorded.
the discounting charge is the interest charge on the cash advance made against the invoices that are the subject of a factoring contract. It is calculated based on a reference interest rate (for example bank base rate, three-month Euribor, etc.). To this reference rate must be added the factoring company’s margin, this ranging from between 0.5% and 4%, depending on the volume of funds to be financed.
method of financing at the request of and according to the needs of the client. DSO, or days sales outstanding, means sales invoiced not yet paid, or the amounts due to the client, or the rotation of customers credit, expressed as a number of days of sales. DSO indicates the customer risk and the effectiveness of a company’s in-house collection processes: a low DSO shows that a company is effective in collecting payment for its invoices.
contractual date by which a buyer undertakes to pay its invoices, in accordance with agreements entered into between it and its supplier.
a creditor’s chasing and collection of payments from its debtor. Payment may be obtained, with no further action needed, either amicably, after giving formal notice, or following a court decision ordering payment. In this case, collection is said to require action from the legal department.
the interest rate at which top Eurozone banks offer unsecured short-term lending on the inter-bank market.
a form of factoring whereby the client sells to a factoring company the receivables in respect of buyers based in a country other than its own.
a form of factoring whereby the client sells to a factoring company the receivables in respect of buyers based in a country other than its own.
all the services a Factor provides to companies, enabling them to outsource the management of their accounts receivable: Management of invoices, including collection of payments, protection against insolvency, financing, etc.
account in which all the transactions related to your factoring contract: purchase of receivables, payment of the various charges, cash advances, etc. are registered. The account’s credit balance is the amount available for drawdown.
invoice financing with a fixed monthly cost, designed for small companies (less than 50 invoices a month, or sales of less than 1.5 million euros).
means the sums available in the client’s factoring account, advanced after the Factor has purchased the client’s invoices.
this is the cash account. It allows for the interest due for any given period to be calculated.
maximum value of invoices against which the Factor agrees to advance funds to a client.
includes all factoring services (management of domestic trade receivables; protection against insolvency; chasing, collecting and managing payments).
insurance against a company’s insolvency or guarantee of payment of a receivable. The guarantee is issued within the limit of the amounts approved.
the maximum amount of the guarantee granted by the Factor in respect of a Buyer. The guarantee ceiling is given for an amount inclusive of VAT in respect of each principal establishment identified by its SIREN (or company registration number).
a guarantee fund is maintained, according to the provisions of the factoring contract, to guarantee repayment of any sum the client may owe to the Factor. The sums allocated to such a fund are not repaid until the accounts are definitively closed.
final failure of a company: suspension of payments, court-ordered company reorganisation or liquidation.
invoices not paid, present in the outstanding used and past due.
London Inter Bank Offered Rate: The rate at which major global banks lend to one another in the international interbank market for short-term loans.
an unpaid receivable, whether disputed or not, that is the subject of action taken by the legal department, for which payment is due or could become due.
comprises factoring and the option of a payment guarantee in the event of customers’ insolvency. The client retains control over the chasing and collection of payments
factoring that enables your company to remove a portion of its current assets from the balance sheet, in accordance with IFRS and US GAAP.
total amount of invoices assigned to the Factor on a particular date. It includes amounts not yet due and past-due receivables.
total value of the invoices purchased by the Factor but not paid, less any credit notes but including bills received not yet due.
an invoice is payable in advance when it is issued before the service is rendered. This can be for an annual service billed at the beginning of the year, 60 days from it being issued; it can also apply to invoices issued on a monthly or quarterly basis.
progress billings are where payment for work under a specific contract, for example building and public works contract, is made in instalments, based on the progress of the work. The progress of work must be accepted by the site supervisor, main contractor or architect. Progress billing invoices show the progress of the work in terms of a percentage, or quantity completed.
a payment document that corresponds to a delivery of goods or services that is payable on a specified date.
a document that shows the debtor the amount remaining due at each due date
reconciliation of payments with invoices.
Where invoices cannot be financed or where a payment is not repaid on the due date, these transactions are posted to a restricted account which is a sub-account of the factoring account.
invoices purchased by the Factor but not financed.
a large buyer negotiates with a Factor, on behalf of its suppliers, advance payment of the suppliers’ invoices, which is provided in the form of credit extended to the suppliers. Any factoring contracts negotiated under the arrangement therefore apply to a single buyer. The invoices are purchased on the basis of an irrevocable payment commitment from the large buyer, assuming the unreserved acceptance of the service and exclusion of the risk of litigation.
if, when an invoice is purchased, the credit limit for a specific client is insufficient, the unprotected portion of the invoice will be accepted but the risk of non-payment will not be covered by the factor. Payments received subsequently “release” the approval limit, meaning that the factor’s guarantee can extend to those amounts thus far unprotected, within the limit of your contract’s credit limit.
statement of receivables (balance due to the company) payable by the customers (buyers), analysed by the Factor.
a type of financing that involves a company assigning its invoices to a company, known as an issuer, which funds the invoices. The issuer funds its purchase of the invoices by issuing tradable securities.
remuneration received by BNP Paribas Factor in consideration for managing and guaranteeing payment of a client’s trade receivables. This is a flat rate, calculated on the amount of each assigned invoice.
designed for companies that are just starting their business (less than 12 months’ trading).
the operation whereby those invoices to be bought are submitted to the factoring company. When invoices are submitted, particulars mentioned on the invoices and the total value of invoices submitted are specified. Submission of invoices to the factoring company triggers financing.
the subrogation notice informs the buyer that it must make a payment for the invoice, not to its supplier, but to the company subrogated to the supplier’s rights. Where a factoring contract applies, the subrogation notice informs the buyer that the invoice has been assigned to a factoring company and payment of the invoice is to be made directly to the factor.
note placed on each copy of issued invoices, specifying to clients that the invoices have been assigned under a factoring contract and payment of which must, consequently, be made directly to the Factor.
the subrogation statement is proof of transfer of title of the receivables in favour of the Factor. It must be sent, duly completed, signed and bearing the company’s stamp, when each invoice is submitted. It summarises the invoices sent to BNP Paribas Factor and the desired financing terms.
a large buyer negotiates an early financing solution for its invoices with a Factor in connection with a credit commitment, on behalf of its suppliers. The factoring contracts thus negotiated under the arrangement apply to a single buyer. The invoices are purchased on the basis of an irrevocable payment commitment from the large buyer, assuming the unreserved acceptance of the service and exclusion of the risk of litigation.
the supporting documents demanded in connection with a factoring contract means all those documents which demonstrate that the goods have been duly delivered to the client or that the service has been duly rendered (purchase order, delivery slip, carrier's collection note, invoice, hourly rate slip etc.).
working capital requirement is generated by the company’s business, which requires the available cash to fund its operating cycle. Working capital requirement is financed by working capital.
The amount of funds made available to a client in respect of its volume of sales with a specific supplier.