Glossary

An online servicing portal only available to Lloyds Bank Factoring Clients.

A business using the professional services offered by Lloyds Bank Commercial Finance to help support their strategic aims.

Corporate Asset Finance (CAF) is one of Lloyds Bank’s Asset Finance teams that is focused on delivering solutions to £100m+ turnover Clients. Dedicated teams support both Global Corporates and Mid Market customers.

The action of checking and following up for payment of outstanding debts within a sales ledger (by phone, statement, letter etc.). This is an element of the overall ledger management.

A credit opinion provided by Lloyds Bank providing information as to the credit worthiness of a Debtor.

An accounting document that reduces or extinguishes the value of an associated invoice.

A business or individual which purchases goods or services from a Client. Also referred to a Debtor.

A document used by a Debtor to inform a Client of the quantity and value of goods being returned, and requesting that the value be returned to the Debtor. A debit note is often used to return goods on credit. The Client then issues a credit note to the Debtor indicating that the goods have been received, and that the purchaser will not have to pay for them.

A monetary obligation from one party to another in return for goods or services which is yet to be paid.

The entity a Client transacts with and ultimately invoices, for the supply of goods or the provision of services with an obligation to pay for the goods or services provided.

A set maximum percentage and/or value allocated to a Debtor typically managed via a specific funding limit. The concentration level is calculated based upon the Debtor balance divided by the value of the sales ledger. As an example a Debtor balance of £40k on a sales ledger of £100k would result in a 40% ledger concentration for the Debtor.

A mechanism to mitigate the impact of bad debt in which an agreed percentage of the debt would not be subject to recourse to the Client. This protects Clients from the risk of their customers not paying whilst the debts remain assigned to Lloyds Bank under an Invoice Finance facility.

The measure used to illustrate the average length of time in days for a debt to be paid.

A business identifies the asset, negotiates the price and arranges for the lessor to buy goods from the manufacturer and lease it to the business.

Charge against amount outstanding on funds in use, this is typically calculated in a similar way to interest at a margin over a base/lending rate. For Asset Based Lending products where funding is secured against fixed assets this charge is referred to as Interest.

The period of time during which an asset has economic value and is usable.

A Factoring facility supports Clients by releasing funds tied up in unpaid sales invoices using the debtor book as security. Factoring companies such as Lloyds Bank will fund up to a set percentage of the sales ledger e.g. Lloyds Bank fund up to 90% of invoice value typically within 24 hours. Debtors are aware of the funding agreement between the Factoring company and the Client and additional services are typically provided (some at additional cost) such as sales ledger management and credit control.

Price at which an asset is sold and bought in the open market.

A Finance Lease enables businesses to purchase essential assets such as equipment and vehicles without the initial upfront cost. The asset is purchased by the finance company and then leased to the customer in return for a series of regular rentals or instalments over an agreed term. A large part or the entire cost of the asset plus interest will be recovered by the finance company. VAT is paid on the regular rentals rather than the upfront purchase price. Monthly rentals can also be fixed giving certainty throughout the term of the agreement. At the end of the initial term, the business has the option to continue utilising the asset for an ongoing rental or alternatively sell the asset at fair market value and receive a percentage of the proceeds from the sale.

The Funding for Lending Scheme (FLS) incentivises banks to boost their lending by reducing bank funding costs. This allows banks to reduce the price of new loans and increase their net lending. The Bank and HM Treasury announced an extension to the Funding for Lending Scheme, which closed on 2 December 2014. This allows participants to borrow from the FLS until January 2016.

Hire Purchase is a simple and straightforward way for businesses to acquire essential assets such as equipment and vehicles without the initial upfront cost. Following the payment of an initial deposit, the cost of the asset is then repaid via regular repayments over an agreed term. Once the option to purchase fee has been paid at the end of the term, ownership of the asset transfers to the purchasing business. Monthly repayments can also be fixed giving certainty throughout the term of the agreement.

Generally a post contractual document issued by a seller (Client) to a buyer (Debtor) upon performance of the contract stating amongst other things the value of the debt that is owed and when due. Could also be pro-forma or pre-contractual.

An Invoice Finance facility supports Clients by releasing funds tied up in unpaid sales invoices using the debtor book as security. Invoice Finance companies such as Lloyds Bank will fund up to a set percentage of the sales ledger e.g. Lloyds Bank fund up to 90% of invoice value typically within 24 hours. Debtors are usually unaware of the funding agreement between the Invoice Finance company and the Client.

Umbrella term for solutions which provide finance against a sales ledger (Invoice Discounting / Factoring / Asset Based Lending).

A company that provides Invoice Finance products.

The periodic payment to the Lessor for the use of the asset. The lease rate is primarily determined by the total cost of the asset, the duration of the lease and the interest rate level.

The Lessee is the end-user of the asset being leased.

The Lessor is the party who finances the purchase of the asset and has legal or tax title to the equipment; it grants the Lessee the right to use the equipment for the lease term, and is entitled to the periodic payments.

A contractual arrangement which allows a business to lease other assets under the same basic terms and conditions without negotiating a new contract.

Where a company’s existing management team are purchasing the company’s shares or assets from a parent company, or non-group company.

A merger is the combining of two or more legal entities (usually limited companies) into one.

Similar to a Finance Lease, in that the asset is purchased (and therefore owned) by the finance company and then leased to the business in return for a series of regular rentals or instalments over an agreed term. The key difference with an Operating Lease is that the finance company will forecast the future value of the asset at the end of the term (known as a Residual Value) and build this into the repayment profile therefore reducing the monthly repayments throughout the term of the lease. This product offers cashflow benefits through reduced monthly rentals and can provide the option to extend the agreement at the end of the term.

A provision by which a business has the right to purchase the asset at the end of a lease term, either at a predetermined amount or its fair market value.

Repayment of an existing loan with the proceeds from a new loan, usually of similar size but on more favourable terms and/or with a new lender. In order to decide whether this is worthwhile, the savings in interest must be weighed against the fees associated with refinancing.

The estimated resale value of the asset at the end of the lease term.

A type of credit that does not have a fixed number of payments, in contrast to instalment credit. Invoice Finance is an example of revolving credit used by Clients. Corporate revolving credit facilities are typically used to provide liquidity/working capital for a company's day-to-day operations.

Also called purchase leaseback, a business sells an asset it already owns to a Lessor for fair market value or book written down value (whichever is less) and then leases it back.

An accounting term used to describe that part of a business’s accounting system which records invoices raised to Debtors and their subsequent payment. It also records related transactions such as credit notes, debit notes and other forms of deduction. Typically the sales ledger is presented in an aged format allowing the user to pin-point the age of any outstanding debt.

The process of allocating cash receipts (payments) against invoices on a sales ledger.

The amount by which Debtor receipts are less than the face value of the invoice, typically expressed as a percentage. Deductions may include credit notes, bad debts, retentions and discounts.

A broad term used to denote the management of a Client’s sales ledger by an Invoice Finance company.

A charge for providing the service element of an Invoice Finance product. The fee is typically charged as a percentage of the invoices sold to Lloyds Bank Commercial Finance or may be a fixed fee.

An online servicing portal only available to Lloyds Bank Invoice Discounting Clients which provides access to their account, Firstcheck credit opinion service, additional products and business advice centres.

This is also referred to as economic life, the period of time during which an asset has economic value and is usable.

Working Capital is a financial metric used to measure a company's operating liquidity or, in other words, its ability to meet every day running costs, paying staff salaries, creditors' invoices etc. The Net Working Capital of a business is calculated by taking its total current assets less its total current liabilities.