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BUSINESS FINANCING GLOSSARY

Debtor

In factoring, your customer — the party who owes the invoice. Because the factor collects from them, approval rides on the debtor’s credit, not yours.

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Related terms

Accounts Receivable (AR)→Money your customers owe you for goods or services already delivered but not yet paid for. Outstanding AR is what invoice factoring advances against.Days Sales Outstanding (DSO)→The average number of days it takes to collect payment after a sale. A high DSO is exactly the cash-flow gap factoring closes.Factoring Fee→The discount a factor charges to advance against an invoice — typically 1–5% of the invoice value, varying with customer terms and volume.Invoice Factoring→Selling unpaid B2B invoices to a factor at a small discount for immediate cash. Approval rides on your customers’ credit, so newer businesses qualify.Invoice Financing→Borrowing against unpaid invoices used as collateral, while you still collect from your customers yourself — unlike factoring, where the factor collects.Net 30 / Net 60 / Net 90→Invoice terms giving a customer 30, 60, or 90 days to pay. The longer the terms, the wider the cash-flow gap.

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