The concept of lending is not limited to lenders. When you, as a company, provide payment terms to a customer, you are essentially lending short term capital. Your customer has received the goods or services and now you are waiting to get paid. Your loan document happens to be the invoice.
Too many times a business that makes a sale is counting its profit rather than checking out the customer. Getting stiffed on a large order can mean eating a years worth of profit – meaning you worked for a year for free. The stakes are really high, so the decision to extend credit terms is plenty important.
With an invoice factoring arrangement in place, we provide a layer of credit management to keep you out of credit trouble. Every new account debtor or customer gets checked for their creditworthiness. We check public records and filings to determine the customer’s ability to pay.
Important tip: always photocopy the incoming payments from all your customers. Over time this may provide good data for determining the payment history of a good customer. We take this sort of payment history into consideration when scoring credit.