Be sure when contacting a factoring company make sure the accounts are available. In order to factor invoices your accounts receivable must be free of any liens. This might include judgments, state or local outstanding taxes, outstanding loans, investors or partners. Any of these examples might shield your obligation to them by securing their legal security position.
The difference between a secured party and a general vendor is important should there ever be any sort of liquidation event. The secured party gets paid in full from the company assets and the general parties have to divvy up what is left. Obviously any lender will want to make sure their loans get repaid under any circumstances.
Position of security is critical. This is handled through UCC-1 filings with your State agency. If there are no filings at all, the first lender to make a loan will be in first position. Any subsequent lender will see another entity in first position, so normally the outstanding loan is paid off and the first lender will release their security position by filing the UCC-3 termination releasing the collateral including the accounts.
Typically a company that has been around for a while has a clutter of old filings that need to get cleared out. If the old filing is with a bank that is now been bought out or merged it can add unnecessary time to the approval process. So a word to small businesses – when you pay off a loan and discontinue the relationship with a lender insure they terminate their security position as part of the payoff.