Liquidity refers to the ability to convert an asset to cash. Cash on hand is, of course, 100% liquid. Most current assets are considered to be liquid. The generally accepted accounting principles definition of liquidity is the excess of current liabilities over current assets.

Also known as non-recourse factoring. Factoring without recourse means that the factor assumes all risk of customer non-payment. Because there is more risk to the factor involved, factoring fees are usually higher and the advance rate lower than factoring with recourse. Though the factoring agent assumes risk, the client usually retains some sort of contractual obligations in terms of providing contact information and in terms of warranties as to the quality of the debt. See also Advance Rate, Charge Back and Factoring with Recourse.

Also known as full-recourse factoring or simply recourse factoring, factoring with recourse means that the client assumes most or all risk associated with non-payment by the customer. If a factored debt proves to be uncollectible, the full amount of the debt is typically subtracted from the reserve (and, if the reserve is insufficient then the client becomes liable for the unsatisfied amount of the debt). Because there is less risk to the factor involved, factoring fees are usually lower and the advance rate higher than factoring without recourse. Because there is less risk to the factor involved, factoring fees are usually lower than factoring with recourse. See also Advance Rate, Charge Back and Factoring without Recourse.

Factoring is the selling of a client’s accounts receivable to a factor, usually at a discount. Factoring can be with recourse or without recourse. In either case, the factoring agent gives funds to the client and assumes responsibility for collection activities on the assumed debt. See also Advance Rate.

This term can have several meanings but broadly refers to the monies charged by the factor when advancing credit for factored accounts receivable. The fees are part of the original factoring agreement and may be netted from the advance rate.