Deposit Account Control Agreement (DACA)

This is an agreement between a customer (debtor), a secured party (lender) and a bank that allows the lender to have a secured interest in the customer’s funds by controlling the deposit account.

Other Terms Beginning With “D”

Days Sales Outstanding (DSO)

A measure of the number of days that it takes for a company to collect revenue after a sale is made. It is calculated by dividing the number of sales on credit terms during a period by the total value of those credit sales (A/R) during that period, and multiplying the result by the number of days in the period.

A low DSO value is evidence that a company collects on its A/R quickly. Invoice factoring with Porter Capital helps to decrease your DSO by employing our full collections team on your behalf.

Debt Covenant
This is an agreement between a company and its lender(s) that the company will operate within stated rules. Also called a financial covenant.

Debt-to-Asset Ratio
Money that a company or individual owes to others, typically in the form of loans or bonds.

Money that a company or individual owes to others, typically in the form of loans or bonds.

These are any amounts subtracted from an invoice’s total value. These are usually taken by the customer without the factor’s knowledge. Any deductions that are known, or expected, to be taken should be disclosed.

A non-cash expense that reflects the reduction in value of an asset over time.

This is all of the discounts, chargebacks, credit memos, allowances, and other deductions that reduce the final owed amount of an invoice.

Discount (DI)

An accounting transaction used to show a reduction in the owed amount of an invoice. These funds are taken from the client’s Earned Reserve Balance to discount the invoice. The two most common types of discounts are:

1. Early payment, pre-payment, or cash discounts that are listed in the invoice’s “Terms of Sale.”.
2. A trade discount offered by the client to all, or select, customers especially for volume-based reasons.

Due Diligence
This is the researching of a business and its owners prior to a lender advancing funds. MCA lenders tend to have minimal due diligence and high fees/interest. Conversely, banks tend to have the most time-consuming due diligence processes at the lowest rates. Invoice factoring can be the best of both worlds – it offers both expedient due diligence and easy access to capital held up in A/R.