Common Freight Factoring Terms Defined

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.

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!