Surprises in the Factoring Industry Aren’t Always a Good Thing

Factoring business owner reveals why he’d rather avoid surprises in the factoring industry in this month’s article from Don D’Ambrosio of Oxygen Funding.

When most of us hear the word surprise, it is usually associated with a good feeling that was unexpected. In the business world, surprises sometimes have a very different meaning that does not have the same good feeling associated with it.

Having worked as an accountant, controller and chief financial officer for both small and large companies, the word surprise can send nervous chills up the spine of management. In accounting, surprises can come in the form of a forgotten journal entry, an under accrued expense or an overstatement of a revenue item. In most cases, these types of surprises have a negative impact on the bottom line causing great discomfort to both the superior and subordinate.

In the factoring industry the same surprise concept holds true.

I find this point especially true during the evaluation of a prospect. At our company we receive applications directly from prospects, brokers and in house sales accounts. It is during this process we require a completed application along with supplemental documentation. Before we generate any reports we always the ask applicant or broker if there is anything that will have a material effect on the evaluation. In other words, tells us as much as you know so we do not come across any surprises. I am pleased to report that in most cases our experience has been that the prospect will give us full disclosure up front.

Unfortunately, there are times when we will find a tax lien, judgment or other derogatory ding on their credit report that was surprisingly forgotten. Anyone who works in the factoring industry knows these are common and it is our job as funders to find a way to work around these situations. For example, you will be amazed to find how cooperative the IRS can be in helping businesses with overdue taxes. On more than one occasion we were able to get our client on a payment plan and avoid their intent to levy. The payment plan allowed us to assist the client in paying the overdue taxes by providing additional cash flow.

For us, the problem lies with the prospect who does not disclose items that will have a material effect on the evaluation. Once we find one questionable item we then start to ask ourselves what other information have they forgotten? Whether you are an applicant or broker, be upfront and disclose as much information as possible to help the factor get the deal funded. Save the surprises for the holidays.

Don D’Ambrosio is the president of Oxygen Funding, Inc., an invoice factoring company located in Lake Forest, California. For more information, he can be reached at don.dambrosio@oxygenfunding.com or you can visit his company’s website at www.oxygenfunding.com

Enjoyed this article?  You may also want to read these two popular articles by Don: Starting Your Own Factoring Business? It’s Your Call and Getting In the Factoring Business – Part Two.