Trust Factoring Companies to Run a Credit Check on Potential Customers

Most businesses turn to invoice factoring to get cash quickly by selling their current receivables. Businesses that want to take advantage of factoring services don’t need to complete a credit check to qualify for the factoring receivables process. Is this because invoice factoring companies will buy invoices from any business regardless of who their clients are? Definitely not. The factoring company instead will vet the business’s invoiced client(s) and run a credit check on them to determine if they are in good standing and have a history of paying their bills on time.

A Client’s Creditworthiness Is Key to Factoring Receivables

Credit Score Factors Factoring Companies Review
If the client passes the verification and credit test, then the accounts receivable factoring process will proceed as desired. The invoice factoring company will pay out the money to the business and then collect on that amount when the customer pays 30-, 60-, or 90-days later. Yet if the credit check does not pan out favorably, the factoring company will notify the business promptly so that it knows the client or potential client is not creditworthy.

The Service Provided by Factoring Companies Is Unique in the Industry

Though on the surface this can seem like a bad thing, as the saying goes, don’t shoot the messenger. The factoring company is actually providing a valuable service to the business by letting them know that their customer’s creditworthiness is not good. If this is a potential customer, this notification can better help the business decide whether or not to actually go ahead and take on this new customer. If the business wants to proceed, it can then require payment upfront.

This credit assessment of a business’s customer or prospect is a unique service provided by those in the factoring accounts receivables sector. Other financial institutions and lenders, such as corporate banks, do not provide this service and leave it up to the business to decide whether or not their customers are in good standing.

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About the Author:

Robert Bernfeld started in the commercial finance industry in 1974. His early years included positions with Aetna Business Credit and Foothill Group. During the next thirty five years. Mr. Bernfeld established both equipment leasing and accounts receivable factoring companies. He partnered in founding Business Facilitators, Inc. in 1999. Mr Bernfeld graduated from the University of California, Riverside in 1974 and received his Juris Doctorate from Loyola University School of Law in 1977.

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