Factoring companies are like any lender, risk adverse. With invoice financing the basis for financing is usually a piece of paper. So the factor has to have comprehensive protocols in place to notify customers, verify invoices and collect payments. It has to become routine and is all based on the worst case scenario. What could possibly go wrong with this transaction? Looking at the factoring deal from every angle, where could it get screwed up? The best client is one who understands this basic fact about factoring and rolls up their sleeves to create a solid model for debt financing. Working with the factor to get sign-offs when needed, helping to get good communication going between all parties, and most important knowing how to properly structure a contract so that the pieces will fall into place. It’s not just about the work, don’t forget you need to get paid.
Long after you have graduated from factoring and onto institutional financing your company will prosper on the foundation of good financial decision making. Learn more about positioning your company for debt financing, here.