After an application has been submitted, the factoring company begins their due diligence or “review of the new client†process. Historical background checks of the business participants, a look at the relative condition of the business itself, who are the customers, their creditworthiness, there may be problematic liens or tax issues, contracts with customers, prior agreements with credit companies, these are all part of the “getting to know you†element of the receivable funding relationship.
Some factors charge a fee for the due diligence process. It is either collected up front when you send in the application, or collected as part of the first funding advance. As it happens, we do not charge for due diligence. There is no cost to you for this part of the service.
Seeing that the factoring company is doing a thorough job is actually a very good sign. It means the factor is not cutting corners and is following the rules set forth by successful commercial finance transactions. In the long run it amounts to your funding source keeping out of harms way by avoiding the many pitfalls countless finance companies have fallen victim to in the past.
Knowing that the factoring company is financially sound is the best insurance you can have when relying on one for your growth.