One key element of the factoring due diligence process is determining the creditworthiness of your customers. This is a feature built into the everyday service when using a factor. We decide whether to accept an account based on the credit history of a particular customer.
The company we are checking on should have some sort of public exposure. In order for the various credit reporting agencies to pick up on a company, they should have had vendors extend them credit.
As our client you can submit potential customers for credit availability before you actually begin to do business with them. This protects your exposure from potential non-payment of unpaid accounts. A factoring company can tell with a degree of certainty whether a business will pay their bills within the following 90 days. Many factoring companies get notifications if a particular account debtor is having trouble.
Normally we will reply to a credit inquiry with one of three responses;
1.) The credit looks fine, unlimited availability
2.) The credit is marginal, so up to a specific dollar limit will financed
3.) None, not enough or bad credit history so no factoring available
This layer of on the spot credit management is definitely one of the featured benefits of using invoice factoring as a working capital solution.