Common Freight Factoring Terms Defined
If you’re new to factoring, you might come across terms that you’re not familiar with. It’s important that your factoring company explains how factoring works and what each term means. To make it easier to understand the process, we’ve pulled together a list of common factoring terms and definitions that we think you’ll find helpful.
Freight Factoring Terms
Factoring: A process where a factoring company purchases your company’s invoices then pays you a percentage of that invoice quickly
Non-Recourse Factoring: Factor assumes credit risk on invoices that aren’t collected within a certain number of days
Recourse Factoring: Customer assumes credit risk on invoices that aren’t collected within a certain number of days
FMA (Factoring Master Agreement): A document explaining terms and conditions of the factoring agreement
BOL (Bill of Lading): A document used in the transportation of goods issued by the carrier
Proof of Delivery (POD): A document that shows goods were received
Reserves: The portion of the invoice that the factor has not yet advanced to the client. Carrier receives most of the reserve amount once the invoice is paid
Working Capital: A financial term measuring liquidity available in a business
Accounts Receivables: Money owed to a business by its clients
Debtor: An entity that owes a debt to another entity
Advance: An upfront lend of a certain amount of money
Freight Broker: An intermediary between a shipper and a carrier
Shipper: Party responsible for initiating a shipment
Carrier: Party that transports goods Uniform Commercial Code
(UCC): The Uniform Commercial Code is a set of standardized legal guidelines defining how sales and commercial transactions are to be carried out in the U.S.
We hope you find these definitions useful when considering or discussing factoring services. If you’d like additional information about factoring or how it works, contact one of our knowledgeable factoring consultants and they’ll walk you through the process. Continue to check back on our blog for more factoring tips and info!
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