The misconception about receivable factoring companies is that they are only a source of funding as last resort. In other words, a company has to be in dire straits to consider using factoring. It is incorrect to say that after a business exhausts all avenues for capital they should finally seek invoice factoring. The truth is, a factoring company will not take all comers. There are plenty of times where a factor will turn down such a deal. Even though the factoring company ultimately decides to fund on the creditworthiness of the account debtor (customer), the borrowing client must show some financial wherewithal to remain in business. Under-funded businesses, poor accounting, lack of proper documentation, unclear billing processes, horrible personal credit history, all can contribute to a turn down.
Commercial finance is after all a business, and like any other type of business a factoring company wants to avoid hassles and headaches. Poorly run companies will end up being more trouble than not. This is good news to existing portfolio clients who rely on consistent service and reliable access to capital.