Glossary

Factoring

 

Advance - Usage or drawing by the Assignor of funds made available by a Factor or a lender based on an asset (invoice).

Assignee - The entity to which an Invoice is assigned.

Assignment - The transfer of Invoices from the Assignor to the Assignee.

Assignor - The entity disposing of an invoice by an Assignment.

Confidential Factoring or Not Notification Factoring - Form of Factoring in which the Assignment has not been notified to the debtor. The Assignor retains total control over the management of collections with the possibility to use a dedicated banking account for that operation.

Debtor (buyer) - A business that has been supplied with goods or services by the Client and is obliged to make payment for them to the Factor, since its debts have been assigned/sold to a Factor.

Factor – A financial institution providing Factoring facilities.

Invoice – Document issued by the Seller to the Buyer, where information regarding the value of the credit to be paid and payment conditions are registered, among others.

Notification - A notice issued by the Assignor to a Debtor which informs him that its related (total or partial) debts payable have been assigned to the Factor.

Cross-border institutions - Network of businesses whose common aim is to facilitate international trade through Factoring, linking the Factors of the different countries to collect locally in those countries.

Two-Factor System - System whereby a Factor uses, by sub-Assignment, a Factor in another country (correspondent Factor) to collect the Receivables of an Assignor exporting to a customer in that country with or without Credit protection and Advancement. The relationship between the Correspondent Factors is usually governed by a previously established Interfactor agreement.

 

Leasing

 

Financial Leasing: legal term used to describe the product which is usually called Leasing in Portugal. It is a unique way to finance assets, equipment or real estate, which is clearly distinguished from a loan because the use of an asset is made available and not the delivery of capital to acquire that asset. As the asset is acquired by the lessor to make it available to the lessee, the security of the operation is increased for all parties, with inherent advantages at several levels.

Lessee: the client in a Financial Leasing contract.

Lessor: the financial institution which makes Financial Leasing available.

Leased asset: refers to the asset which is leased in a financial leasing contract. It is common to be called, in Portuguese, “coisa locada” or “bem locado”.

Residual Value: It is the value over which the leased asset can be acquired by the lessee at the end of the financial leasing contract, should he so wish. Usually, this residual value is pre-agreed at the beginning of the contract.

 Purchase option: At the end of a financial leasing contract there is always a “purchase option” for the lessee to acquire the leased asset. If no “purchase option” exists, than we are not in the presence of a financial leasing contract but something else.