Using a Factor’s Credit Risk Expertise

You probably already know about the ability to sell invoices to a Factor. You may also know you don’t have to Factor all your invoices – just the ones you want or need. But did you know a Factor could provide tremendous help on invoices that you don’t even factor?

Many factoring companies offer Credit Risk analysis when you are considering taking on a new client. Why should you take advantage of this?

For starters, Factors are very good at determining the likelihood of payments coming in on time. They have been doing it, for a variety of clients, for a long time. They can assist in determining the credit worthiness of a potential client – often at no charge to you!

Many businesses skip this crucial step. They seldom run credit checks on potential clients and pay the price later when the client is either far behind on payments or ends up not being able to pay at all.

A Factor can provide a comprehensive report about the potential client before you take on the account. They can analyze credit worthiness, payment records, and even aging reports. In addition, the information provided by the Factor may help you determine what credit terms, if any, to extend your new client.

As an added bonus, you will have a pre-qualified customer in the event you ever desire to factor an invoice with their name on it as debtor. If the Factor tells you up front they would not be able to purchase an invoice with the client, that might be a good reason to either steer clear or work with the customer on a limited or cash basis until they establish a better track record.

In summary, many Factors have a variety of services available to clients going well beyond simply purchasing invoices. They can pre-qualify clients, provide accounting help; even take over your day-to-day billing process. The value of a strong factoring relationship using credit risk analysis continues to increase in the face of a weakening economy.