Invoice Verifications in Asset Based Loans

Asset based lenders may perform invoice verifications as part of managing the borrowing base of a client. Invoice verifications allow the lender to confirm that the invoices used for the borrowing base are accurate and free of disputes. Clients are often concerned about the verification process because the asset based lending company interacts directly with their customers. Obviously, clients worry that verifications could inconvenience their customers and create problems.

Are all invoices verified?

Verifying every invoice would be impractical and could interfere with the relationship between a client and its customers. Instead, most asset based lenders verify only a few invoices. The way verifications are handled varies by company. Most lenders spot-check invoices of average value. Larger-valued invoices, on the other hand, are usually verified.

How are the invoices verified?

Each lender has its own verification procedure, but they all follow a similar process. Invoices are checked by phone, fax, or email. Usually, a representative from the lender contacts the borrower’s client directly. The point of contact is typically in the accounts payable department. Most lenders implement a soft-touch approach to avoid creating problems.

What should I tell my customers?

Asset based loans are fairly common and most larger companies are familiar with verification calls. Most of the time, verifications are not a problem. However, if this is a concern, consider advising your customer that some invoices will be verified.

Differences with factoring verifications

One of the advantages of using an asset based loan instead of factoring is that asset based loans do not require regular contact with clients. While both programs use verifications, they serve slightly different purposes. In a factoring transaction, the factoring company is buying the invoices. Since they are purchasing the receivable (an asset), a more thorough verification approach is required. With an asset based loan, the verification is done only to determine the borrowing base. To learn more about the similarities and differences between these solutions, read “Asset Based Lending vs. Factoring

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