Quiz

• What is working capital?

  The cash a company needs to operate
• What does factoring involve?

  Purchasing sales ledger and providing funds
• What is a Notice of Assignment?

  A notice instructing payment to the financier
• How is Approved Debt defined?

  Defined in the agreement with the financier
• What does recourse mean in invoice finance?

  The risk of non-payment remains with the client
• How does factoring differ from discounting?

  Factoring offers extra facilities; discounting does not
• What does "Sell and Forget" mean?

  Contract is completed once goods are delivered
• What are sales ledger erosions?

  Invoices credited for disputes or returns
• What is the Opening Sales Ledger?

  Receiving the 'take-on' invoices
• What is a Non-Notifiable invoice?

  An invoice not eligible for funding
• What are retentions in invoice finance?

  Figures deducted from the approved balance
• What is a floating charge?

  Allows selling stock in normal business
• Who are unsecured creditors?

  Lenders without collateral for loans
• What is invoice finance?

  Sale of unpaid invoices for immediate payment
• What are the steps in the invoice finance process?

  1. Client sends invoice to customer
  2. Client sells invoice to financier
  3. Financier makes prepayment
  4. Payment collection by financier or client
  5. Client receives balance after fees
• What does an invoice financier do?

  Chase debtors and manage sales ledger
• What is disclosed factoring?

  Clients' customers know about the financier
• What is recourse factoring?

  Client is at risk if customer defaults
• What is non-recourse factoring?

  Financier accepts risk of customer default
• What is invoice discounting?

  Financier provides funds but not collects debts

  
• What is disclosed invoice discounting?

  Invoices bear notice for payment to financier

  
• What is confidential invoice discounting?

  Customer is unaware of the financing agreement

  
• What is export factoring?

  Factoring for goods and services overseas
• What does CHOCC stand for?

  Client Handles Own Credit Control
• What is selective invoice finance?

  Client sells specific invoices only
• What is service only factoring?

  Management skills offered without prepayment
• What is the typical prepayment percentage in invoice finance?

  Typically ranges between 70-85%
• Why do companies use invoice finance?

  To improve cash flow and profitability
• What is trade finance?

  Purchasing products from suppliers for the company
• What is stock finance?

  Lending against raw materials and finished goods
• What types of security may a company offer?

  Property, machinery, stock, unpaid invoices
• How do invoice financiers find clients?

  Through referrals, advertising, and brokers
• What is the cost of funds in invoice finance?

  Discount charge over the bank base rate
• What are additional charges in invoice finance?

  Charges for refactoring and money transfers
• What are the benefits of recourse factoring?

  Provides sales ledger management and credit control
• What are the benefits of non-recourse factoring?

  Provides credit protection against bad debts
• What is the process of taking on new business?

  Identifying suitability, matching service, taking client on
• What makes a prospect less suitable?

  High levels of returns and reciprocal trading
• What is the importance of financial position in assessing clients?

  To monitor trends and assess current position
• What is the significance of track record in client assessment?

  Indicates business operation duration and management quality