Ozarks Capital Funding

Invoice factoring gives your company much-needed working capital. Call us today at (417) 849-7394 to get started!

Ozarks Capital Funding header image 2

Creditworthiness of the Customer

January 3rd, 2010 · 1 Comment

The simple definition of invoice factoring is “the sale of a company’s accounts receivable from creditworthy customers for immediate cash“.    The key word here is creditworthy.  Factoring companies must feel confident that the receivables will be paid in a timely manner by the client’s customers consistently.

Because of the intense competition in the factoring industry, some factors have strayed from the concept of proper credit decision making.  This can eventually have a detrimental impact not only on the client, but will weaken the portfolio as a whole.   Other clients who are dependent on funding their working capital needs may be adversely effected by the liberal credit decisions made by the factoring company.  Not only that, but a substantial loss because of these loose policies may cause the factoring company to go out of business.

As a client, try to understand why most responsible factoring companies use conservative credit policies to guide their actions.   Customers who consistently pay their bills late will likely not be “factorable”.

Get a free, no-obligation quote by filling out our quick onine application.

Tags: accounts receivable factoring · cash flow · factoring accounts receivable · factoring invoices · factoring receivables · invoice factoring · receivables factoring · receivables financing

1 response so far ↓

  • 1 Martin // Jan 4, 2010 at 7:47 pm

    Factoring is a great way of improving cash flow. My website providing actionable information to owners wishing to sell their businesses suggests it as a tool for working capital management.

    However, you identify a key issue. It is best used as a timing tool, and not a risk transfer tool. Factors are not seeking to assume your risk And haven’t so called risk transfer tools created enough mischief for our economy?

Leave a Comment