There are questions regarding how the accounts receivable factoring industry can have an affect on other industries, like large retailers. Whether the way factors view particular companies can cause changes in the general outlook of those businesses. Because of the very nature of invoice factoring, the answer is decidedly yes. Factoring companies are looking at the creditworthiness of the account debtors. So if a factoring company has clients who are vendors of a large retail store, they are paying particular attention to how timely the invoices are being paid. Once invoices start aging over 90 days things begin to heat up. The factor will stop making advances on the vendor’s invoices, the vendor will stop shipping to the retailer, and the retailer will be operating with empty shelves. It’s a tough reality, but the accounts receivable finance companies are not responsible for extending free credit to industries in trouble.
On the flip side, vendors who use invoice factoring stand a better chance of being paid on a timely basis for obvious reasons.