Disbursement Definition: What Is a Disbursement?

“Disbursement” is a term for the paying out of money, particularly when that money comes from a specialized fund. Disbursements take on several forms in the world of finance.

• Student financial aid awards: Financial aid disbursement is a form of payment to students to help them cover the cost of their education. Financial aid funds (such as scholarships and direct loans) come from a dedicated pool of money; a university's private financial aid might come from its own financial aid office, while federal student loans come from designated loan funds within the Department of Education. When a student borrows from a loan fund, they sign a master promissory note promising eventual repayment. Then, the loan proceeds to travel from the fund's bank account to the student's account, either via a paper check or direct deposit. First-time borrowers must fill out a FAFSA (free application for federal student aid), which sets the student loan disbursement process in motion.
• Corporate disbursements: These cash transfers may cover a number of business expenses, including payroll expenses, reimbursements for out-of-pocket expenses, payments to suppliers, profit distributions to an ownership group, and dividend payments to shareholders.
• Cash disbursements: Cash disbursements are a broad grouping of disbursements within a fixed time period. Cash disbursement dates often cover a financial quarter or an entire fiscal year. Despite the presence of the word "cash," these disbursements can be paid in a number of ways, including via paper checks and direct deposits.
• Controlled disbursements: Banks may offer controlled disbursements on behalf of a client. They make disbursement payments on specific business days to allow a company to keep as much money in the bank as possible at a given time. This lets the company earn more interest and it keeps the bank's overall balances higher.

A disbursement is not a synonym for a refund. Rather, a reimbursement is synonymous with a refund. Disbursements refer to a much broader category of payments. However, one of these disbursement payment types is in fact a reimbursement for out-of-pocket expenses, which often comes out of a business's petty cash account.

The word “disbursement” refers to a specific type of payment that’s taken out of a specific fund. In precise terms, disbursement means a transfer of money from a payer or lender's bank account to a recipient's bank account. The disbursement of funds can take many forms including cash payments, paper checks, and an electronic funds transfer (EFT). Businesses and loan servicers tend to use disbursements to keep track of their total cash flow, as opposed to narrowly focusing on the payment of money to one individual or business.

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