advance factoring

financial service wherein a factor advances payment to a company to purchase its accounts receivable prior to maturity minus the factor's commission. It can be done with or without recourse.

asset-based lending

practice of loaning money secured by an underlying asset that serves as collateral in case the loan is not paid on time


maximum level of output a company can sustain without accessing its cash and cash equivalent assets


assets, such as equipment and factories, needed for a company to conduct business


physical form of currency, including banknotes, that can be readily spent

cash budget

expected amount of cash inflows and outflows for a business during a specified period

cash pooling

cash management strategy wherein a company consolidates the cash balances of its subsidiaries

commercial paper

unsecured, short-term debt instrument issued by a corporation, typically for financing accounts receivable and inventories, in order to meet short-term liabilities

conversion cycle

metric used to measure the time between when a company pays its suppliers and when it collects payment from its customers

customer advance

act of a customer paying up front for a product or service before actually receiving the product or service


agent, usually a third-party financial institution, who purchases a company's accounts receivable at a discount


quantity of shares made available for trading when stocks are offered as an alternate source of financing

hurdle rate

minimum rate of return required by an investor or management to proceed with a project


creditor's legal right to sell the collateral property of a debtor who does not fulfill obligations of the loan or another contract

line of credit

arrangement between a bank and a business that establishes the maximum amount of a loan that a business can borrow


final payment date of a loan when the principal is due to be paid

non-revolving credit

line of credit where available funds can only be used once. When they are repaid, they can never be borrowed again.

operating cycle

average duration it takes to produce goods to sell, sell the goods, and receive cash from customers in exchange for the goods in order to produce more or pay bills

prime rate

special interest rate banks give to favored customers

recourse factoring

financial service in which a factor purchases a company's accounts receivable but requires the company to buy back any unpaid receivables

revolving credit

line of credit where available funds can be used and repaid repeatedly as long as the borrower abides by the creditor's terms

short-term loan

debt that is typically repaid in one year or less

trade credit

informal business-to-business agreement where a company can purchase a good or service without paying the supplier up front

weighted average cost of capital (WACC)

formula for determining the relative average a company is expected to pay to all its security holders to finance its assets

working capital

current assets minus current liabilities, which can help determine the business entity’s ability to pay current liabilities