Credit Card Factoring: Glossary of Terms

Asset - Any item, belonging to a business, that can be converted to cash.

Bank Business Loan – Funds offered to business owners through banks. Borrowers are usually required to have excellent credit scores and collateral.

Business Cash Advance – An alternative to traditional methods of business financing that allows small business owners to sell their future credit card sales in exchange for a cash advance.

Collateral – Personal assets that are used to secure a loan. Lenders may ask a borrower to put up collateral. In the event that the borrower cannot or does not repay the loan, the collateral (house, car, property, etc.) can be seized and becomes the property of the lender.

Credit Card Factoring – A process that utilizes a business's credit card sales to advance the business owner a lump sum of cash for business use.

Credit Card Processor – A company/vendor that manages and processes credit card sales for a business, transferring credit card funds between various accounts.

Credit Card Sales – The dollar amount that a business makes when customers pay for products and/or services using credit cards.

Equipment Leasing – A process that allows small business owners to receive equipment for their businesses and make payments on it (usually monthly), rather than purchasing it. Often, business owners are given the "lease-to-own" option, which allows them to purchase the equipment after they have made a certain amount of payments.

Gross Sales – The dollar amount that a business makes when customers purchase products and/or services. This includes debit/credit cards, cash check and all other forms of payment.

Liability – The legal debts or obligations of a business. They are settled through the transfer of money, benefits, goods/services, etc.

Lien - a form of "security interest" granted over property, in order to ensure that a business owner pays his/her debt.

Merchant Statements – Monthly statements, prepared by a business's credit card processor, listing every credit card transaction that took place within the business during a certain month.

Payback – The process of repaying a business cash advance. A small, predetermined percentage of a business' daily credit card sales is automatically deducted until the advance is repaid.

Working Capital – Current assets minus current liabilities. Working capital is a measurement of a business's short –term financial health and can be calculated by subtracting current liabilities from current assets.

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