Now that you know about payments being made directly to the factoring company, you also need to know that with invoice factoring the biggest no-no is contacting an account debtor (your customer) and changing the payment instructions. Once financing commences every invoice payment from a factored account MUST be sent directly to the factor. There are no exceptions. Even if a payment check may have partial funds that belong to you and haven’t been factored. Failure to have the payment made to the factoring company is called “mis-directed payment†and usually is associated with a penalty and possible default and closure of the financing arrangement.
A notification letter goes out to each customer account acknowledging proper payment instructions. Once that notification has been received, no matter what the circumstances, you cannot legally change those instructions on your own. It’s a crime, you would be stealing, and you can be prosecuted. Certainly your financing relationship will instantly be in jeopardy and your business will undoubtedly have an adverse event.
Stay on the safe side, do not fool around with factoring payment instructions.