A factoring company like all other commercial finance lenders are risk adverse. With regards to invoice financing, the basis for getting operating funds is usually a piece of paper. For this reason the factor has comprehensive protocols in place to notify customers of the assignment of proceeds, verify the invoices and ultimately collect customer payments. This routine is all about avoiding the worst case scenario, what could possibly go wrong with this transaction? We are constantly looking at each factoring transaction from every angle to see – where could it get screwed up?
The best factoring client is one who understands how factoring works and rolls up their sleeves to create a solid model for debt financing. This means working with the factor to get sign-offs when needed, helping to get good communication going between all parties, and most important knowing how to properly structure a contract so that the pieces will fall into place. It also includes properly notating invoices to have a new remit to address for payments to go directly to the factoring company.
Long after you have graduated from factoring and have qualified for institutional financing your company will prosper on the foundation of good financial decision making. Learn more about positioning your company for debt financing, here.