There is definitely a big difference between what a factoring company looks for in a deal versus what an investor is looking for. To be sure, the investor is interested in the idea. Does the concept have enough fuel to get off the ground and gain traction? The investor knows they can change the model, change the personnel, change location even change the name of the company if that is what it takes to make the idea successful.
But a factor doesn’t have much interest in the idea. They are only interested in revenue in the form of accounts receivable, so the focus is much more about how the business operates. What kinds of decisions are the owners making now and in the past? If there is bankruptcy on record – that speaks to poor decision making and the possibility of a borrower walking away from their obligations. Does the borrower have the sophistication to provide solid financial documents such as current Balance Sheet and a Profit Loss Statement that makes sense? Does the current invoice aging report have old over 90 day unpaid invoices? Are all payroll taxes current and paid? All of these questions reflect on how the business is run.
What the company is actually doing is secondary to it having a good solid operations history with positive growth. When factoring accounts, it’s not the homerun idea, rather it’s a solid reputation for hitting singles and doubles consistently.