The function of factoring invoices is to provide capital by making advances on creditworthy accounts receivables. This means the customers who order the product or service must have a positive credit history. The factoring company checks the credit on every customer prior to accepting the invoice for factoring. For the most part factoring companies rely on public information like Dun & Bradstreet and Experian or in cases of publicly traded companies, their quarterly reports, in order to independently verify the customer credit. In this way, the factoring company offers, as an added benefit, a layer of credit management protection to their clients, protecting them from extending credit to poor performing businesses. Just one of the many features built into the invoice factoring experience.
One pro-active procedure a business can set up to verify the positive credit of their customer is to make photo-copies of incoming payment checks. This could come in handy to verify a consistent payment history when trying to negotiate a higher credit limit for a particular customer. Many times the credit agencies do not have access to all the information to offer a proper rating. By making copies of payments a factor can see directly that a customer is paying their invoices in a timely fashion. A factoring company enjoys working with a client who understands the process and works to improve the relationship.