When a factoring company makes an advance on your invoices, it is important to understand that the repayment of the advance comes directly from the payer of the outstanding obligation. In other words, we pay you and your customer pays us back. This is the simplicity of using receivables factoring to grow your company. Critical to the ongoing factoring relationship is every payment towards an invoice that has been financed gets repaid directly to the factor. The customer will receive instructions you have assigned the proceeds of your invoice to a third party. The customer will understand they can continue to make the check out to your company, they only have to mail the check to a new ‘remit to’ address – or in the case of ACH wire transfer payments, the routing and account number will need to be changed. This helps so the customer does not need to create an new vendor account in their bookkeeping.
This is the crux of the factoring transaction, we pay our clients and their customer pays us back. Once we receive the customer payment, that transaction is retired and we move on to the next one. This keeps the ongoing relationship simple and easy to work with.