When deciding whether to bring on a new factoring client, various aspects of the company and their model are investigated prior to committing to fund. For example, what is the particular industry? Is the size of the deal right? And will the company be easy to work with, a good fit? One of the major concerns for all types of external capital resources is who comprises the team?
It’s strictly business when the factoring company begins to gather information about the company, the owners, and anyone who may have control over the finances. When a potential client says they don’t release their financial statements to outsiders, it says one thing about them – they’ve never closed on a commercial loan before. Company financial statements are not considered “proprietary information†to factoring companies who are considering financing receivables. Either is asking about personal background. There are two considerations when asking for this material. One of course is the information itself, but the other is equally important. Entering into a funding relationship, a level of trust has to be established, which happens when the story furnished matches the independent reports.
The bottom line is the relationship between factoring companies and their clients has to be set on a good foundation of transparency and free flow of information. An experienced factor with years of due diligence familiarity has little regard for clients who are hiding critical information which has bearing on the financing of invoices. Even if it is bad news as long as it’s provided quickly, with plausible explanations, there will be a better chance of the funding going through.