If your business needs cash fast to cover unexpected expenses, meet payroll demands, or just pay its bills, invoice factoring may be a great option for you. Unlike traditional banks that require a credit check, accounts receivable factoring will not seek your FICO score and requires less underwriting.
Essential Documents Invoice Factoring Services Require Include:
1. Accounts Receivables / Payable Aging Report — This critically important document is required as the invoice factoring company will not be able to proceed without one. This report details of your current and most recent invoices (usually going back 90-days). It enables the factoring company to verify and identify your clients, the amount owned, and assess their creditworthiness.If your clients have a solid history of paying their bills on time, you should be good to go as far as using this client for your factoring receivables.
If not, you probably will not be able to use them and will have to rely on other clients. This verification process is the most essential component of the factoring receivables transaction.
Along with this report, you may be requested to send along a sample invoice so that the factoring companies can ensure there is nothing wrong with their layout, design, readability, etc. This step can prevent future snafus, such as a client not paying their bill because they misread the invoice.
2. Articles of Organization or Incorporation — Your business’s identifying documents will be requested by the invoice factoring companies in the same way that clerk may request your ID for credit card transactions. Basically, the company just wants to verify you are who you say you are and ensure that your business is legitimately set up and filed with the appropriate government and related agencies. To prevent possible fraud, this is an essential step and lacking the proper identifying paperwork will delay your transaction.
3. Completed Invoice Factoring Application — As with any business transaction, the factoring company will ask you to complete an application so be sure to have business identifying information available. Factoring accounts receivable specialists can help you complete the form and feel free to ask them questions as needed, especially if you are new to the factoring services.
Though these are the key requirements for any factoring deal, other documents may be required and this may differ depending on state, local laws & company requirements. For instance, some invoice factoring companies may ask for most recent tax returns (business or personal) while others may not.