To do invoice factoring you need to have creditworthy customers. This means the companies who receive the product or service must have a positive credit history. The factoring company will check the credit on each account debtor or customer. We do this free of charge in order to determine whether or not an invoice is able to be financed. Factoring companies use public information like Dun & Bradstreet and Experian or in cases of publically traded companies their quarterly reports. The response to a customer credit check is one of either; no factoring because the customer has bad credit or no credit history, or factoring is available but only up to a certain dollar amount due to a weak financial condition or unlimited invoice factoring availability.
In essence the factoring company offers its clients a level of credit management so that they may reflect the credit terms they offer its customers. A factoring client may decide to tailor their terms based on the credit check done by the factoring company.