Accounts Receivable Factoring

What Makes for a Perfect Factoring Application?

Posted by Factor Funding Co. on June 2, 2016


Sending in your application for invoice factoring can be an ordeal if you aren’t properly prepared. If you don’t know what a factoring company looks for in an ideal candidate, you may not want to press “send” just yet. Find out what makes the perfect factoring application so you can send yours with confidence.

Having a Personal Social Media Presence

Factoring companies will need to verify that a client is a real person and not a scammer. Providing an easy-to-find website is helpful, but it’s having a social media presence that allows companies to make sure there’s a real person behind your brand. Companies evaluate more than just what you enter into their online application form—they look at who your company is, what your values are, and what your customers are like. Being active on social media helps a factoring company ascertain what type of client you are.

Becoming a Verified Business Entity

It may not be enough for your business to be under sole proprietorship. LLCs and corporations have a higher chance of acceptance because it shows you’ve put work into building a company. It reduces your personal liability and demonstrates business savvy, proving to factors that you’re a low-risk client.

Becoming an LLC or corporation isn’t difficult. Contact your state’s Secretary of State for guidelines and information about the tax and legal consequences of making this change. Regardless of your business structure, you must ensure you’re registered with your Secretary of State. Virtually every factor will look at this information to verify your company’s authenticity and screen for tax violations.

Keeping Good Company Records

Having documentation of your company’s history, purchase orders, invoices, contracts, and payments also helps a factoring company decide if you’re a good fit. Your contracts and invoices should have important details, such as a customer’s full name and contact information. A factoring company is less likely to approve an application if you don’t have full, organized records to help move the process along. The information in your documents should be accurate and up-to-date so it doesn’t look like you’re hiding something.

Improving Your Credit Score

Do your best to keep tabs on and improve your company’s credit score. Your credit history is one of the first things a factor will assess. While an excellent credit score isn’t a prerequisite for approval, it can help you in many other ways. Factoring your invoices can build your credit score if the company you work with reports your payment history to credit agencies. When searching for a factor, keep this benefit in mind.

Communicating With Your Customers

A factor can’t fund an invoice if you and your customers aren’t on the same page. You must confirm that unpaid customers acknowledge your company upheld its end of the bargain. Your business must have proof that a customer has agreed to pay for rendered services by a specific date. If the relationship between you and your customers is strained or weak, a factoring company may see you as a high-risk applicant. Communicate with your customers regularly to avoid mistakes and misunderstandings.

Submitting a Stable Customer’s Invoice

The first invoice you submit for factoring should be from your largest, most stable customer. Putting your best foot forward at the start of a factor relationship will go a long way toward convincing the factor you’re a good business to fund. Factoring a reputable customer will ensure the factor receives payment, in turn boosting your reputation as a client. If you don’t have outstanding credit or a long company history, this method will help improve your odds of getting a positive response back from factors.

Following these tips before you submit your invoice factoring application can substantially help you receive the answers you need from factors. Just like any business, factoring companies are looking for potential candidates with the lowest investment risk. Prove your company is a good fit by doing everything in your power to look good on an application.

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