Although the factoring application process varies by factoring company, two things always happen early in the application process. First, the factoring company requests a copy of your most recent Accounts Receivable Aging Report (A/R Aging). Second, the factoring company performs a preliminary Uniform Commercial Code (UCC) search in your business.
Arguably, these are the two most important preliminary resources that factoring companies consider when evaluating clients. Let’s look at them in detail.
Accounts Receivable Aging Report
This report shows all outstanding invoices and categorizes them based on how long they have been unpaid: “Current,” “+30,” “+60,” and “+90.” “Current” lists invoices within terms. “+30” lists invoices 30 days past terms. Similarly, “+60” and “+90” list invoices 60 and 90 days past terms, respectively. This report helps the factor determine which invoices may be eligible for factoring (provided they pass the credit review). Most factoring companies will only buy invoices that are less than 60 days old.
The UCC Search
Specifically, factoring companies search public records to see if the client’s invoices (accounts receivable) have been pledged as collateral for another transaction. Most business financing transactions that require collateral (e.g., a business loan) have a UCC filing. The UCC search is important because factors require first position on the invoices that they are funding.
Note that these two things are not the only things to worry about when applying for factoring. You should avoid these mistakes and roadblocks. Lastly, you can improve your chances of success by using this trick.
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We can provide factoring lines with high advances at low rates. For more information, get an online factoring quote or call (877) 300 3258.