Factoring Glossary
Insolvency
It is the situation in which the payables cannot be paid on maturity date. In such a situation, demanding party notifies to the court that the debtor is unable to pay its debts, and the debtor may demand its bankruptcy from the court stating that it is in insolvency.
Evidence of Insolvency
It is the official certificate given by the Execution Office stating that the debtor does not have adequate assets to pay the receivable which is tracked in legal aspects.
Interest Number
it is the amount which is used in interest calculations and obtained by multiplying the remaining payable with number of days subject to interest and dividing the result with one hundred.
Letter of Credit
It is a letter sent by a bank to the correspondent abroad bank for a certain amount and for a certain period to the name of a third party in order to open a credit before it.
Ratio of Return on Assets
It indicates the net profitability of the investment in assets.
Assets
It expresses the whole assets possessed by a company (liquid assets, receivables, stocks, liability assets).
Receivables
It refers to consideration of the goods sold or the services provided by the Seller Company.
Receivables Turnover
It indicates the speed of collection of the receivables sourcing from the sales of the company.
Balance Sheet
It is the table indicating the sources of economic assets of a company in a certain date and indicating which areas such assets are invested on. It consists of liquid and liability assets. On the liquid assets of the Balance sheet; current assets of the corporation, receivables and loss amount if any, are available. On the liability side; the amount which yields after deducting the payables of the corporation from the sum of the table, in other words the own resources are available. Therefore; the liability and liquid sides of the balance sheet are always equal to each other.
Disclosed Factoring
It is the type of factoring in which the Seller Company notifies its buyers on that it has assigned to the factoring company its receivables sourcing from future sales. In such a case Debtor Company shall pay the invoice amounts to the factoring company.
Undisclosed Factoring:
It is the type of factoring in which the Seller Company does not notify its buyers on that it has assigned to the factoring company its receivables sourcing from future sales. In such a case Debtor Company shall make the collection of the invoice amounts on itself.
Borrowing Ratio:
It indicates the relationship between the foreign resources which the business has provided by borrowing, and the own resources provided by the partners which is created as a result of activities.
Debt / Equity Capital Ratio
It indicates that the company has supplied the business capital and requirements of financing the investments whether by external sources (borrowing) or by internal resources (equity capital).
Borrowing Rate
It indicates the relationship between the foreign resources which the business has provided by borrowing, and the own capital provided by the partners which is created as a result of activities.
Forfeiting
It is the transaction where the rights of receivables with promissory notes sourcing from export of future goods and services by the finance corporations named "forfeiting company”.
Payment under Guarantee (Pug Payment)
It is the payment made by the factoring company of the assigned receivable in case the buyer falls in insolvency.
Irrevocable Factoring
It is the type of factoring where the Factoring Company undertakes the risk of failing to make the payment of the receivables. The Seller Company benefits from the guarantee of factoring.
Bankruptcy
It is the termination of activities since the company falls into insolvency.
Export
It is the sale of a good which is manufactured inside the country by a person or a company.
Conflict
Any and all kinds of objection, commercial default, physical defects which may occur in the goods and service sold.
Discount Credit
Discount is a cash credit which yields upon the payment to the customer of the remaining amount following that interests, commission and BITT are deducted, which belongs to the period from the utility date of a commercial note to the maturity date of the promissory note.
Import
It is the purchase of a good from abroad by a person or a company.
Revaocable Factoring
It is the type of factoring where guarantee service is not granted by the Factoring Company, but only financing and funds collection services are offered.
Credit Rating
the credit worthiness means the result which is made after the investigation and assessment to determine whether any credit would be granted, or not, to the company demanding credit.
Libor
It is the dollar deposit interest rate which is generally applicable for the credits with terms between 3 and 6 months and which is determined in a daily basis between banks of London. This rate, which is fixed by 11:00 a.m. as per London time zone, is used as reference interest by the markets.
Liquidity
It is called the purchase power such as cash money and gold, stock certificate; which are readily available in persons and companies or in their accounts.
Liquidity Rate
It is the capacity of a business to pay its short term payables.
Limit Approval Notification
It is the document by which the guarantee limits established by the Factoring company for the buyers are notified to the seller.
Net Business Capital
The difference between the current deposits of the business and its short term payables is the net business capital of that business.
Average Maturity
It indicates the average collection period of the invoices which are assigned to the Factoring company.
Advance-Payment
It expresses the payment a part of the invoice amount which is assigned.
Assignation
Transfer of the receivables.
Maturity Date
It is the term granted to a debtor person or company to pay its payables. The payment of a payable or a promissory note is also called maturity date.
Foreign Source
They are the sources which the business has provided by borrowing, excluding the own resources of the business.
