Consumer Finance Key Terms

Explore consumer finance terms like purchase order financing and consumer finance receivable lending

By Sandy Baker

Consumer finance allows a business to gain additional sources of income while awaiting payment from the client. Often, the gap between being paid for a product or service and having to pay accounts payable can limit the cash flow of a business. Third party consumer financing programs are available to bridge that gap including consumer finance asset based lending, consumer finance receivable lending and purchase order financing. Businesses may wish to explore their options and understand terms involved in consumer finance prior to using these services.

Consumer finance asset based lending

Companies provide businesses with consumer finance asset based lending. These lenders aid businesses in mergers and help them to achieve business goals. Some lenders provide several types of consumer financed lending.
Try: Wells Fargo explains what their consumer finance asset based lending offers.

Consumer finance receivable lending

Consumer finance receivable lending is an area many businesses are entering. Here, businesses buy credit card accounts from lenders to collect on the interest from them. The process is similar to buying bank mortgages for an investment purpose.
Try: Fountainhead Funding offers a thorough explanation of the process of consumer finance receivable lending. Check out the section under "How it Works" on their website.

Private label credit card programs

Private label credit card programs allow businesses to access loans easier for their consumers. This type of consumer finance tool for businesses is available for prime and sub-prime loans. These programs can help a small business get clients pre-approved for necessary loans. Consider the differences in costs and features of prime and sub-prime loans.
Try: East Bridge Funding provides private label credit card programs and offers an explanation on its website.

Purchase order financing

Purchase order financing is a method of financing the production of a product that has been pre-purchased by the consumer. It is a short-term financial solution for businesses that have a strong credit history.
Try: 1st Commercial Credit provides an overview of what purchase order financing is and how it works.

Invoice factoring

Invoice factoring is the process of borrowing funds to continue the operation of a business while waiting for consumers to pay their debts. A factoring advance is the amount of money provided to the business, usually at 80% of the invoice's value.
Try: Business to Business Capital provides more information on invoice factoring, including diagrams depicting how the process works.

Consumer note purchasing

Consumer note purchasing is the process of turning accounts receivable, including new accounts and older portfolios, into immediate cash for the business.
Try: Access Funding Center defines what consumer note purchasing is and how it works.