How do I Qualify for Factoring?

Qualifying for invoice factoring is much easier than qualifying for a traditional funding option, such as a bank loan. This is one of the main reasons why business owners prefer to factor their accounts receivables instead of applying for a bank loan. The approval process for factoring is quick and simple. Often times, applications for factoring are online and you can be approved within days of completing the application. If you’re the owner of a startup or a small business, factoring could be a great financing option for your business.

Invoice Factoring Basic Requirements

• Does your business provide products or services to other businesses or have government contracts?

Invoice factoring is typically a financing option for B2B (business-to-business) companies, as well as businesses working with government contracts. Business-to-consumer companies may benefit from a merchant cash advance or an unsecured business loan.

• Are your customers creditworthy?

Approval for factoring is based on the creditworthiness of the business you’re billing, not yourself. If your customers are creditworthy, your chances of being approved for factoring your invoices are greatly increased, because they are the ones responsible for paying.

• What if you’re a startup?

Start-up companies are approved for factoring on a regular basis, which is why invoice factoring is a great option for businesses who don’t have a long credit history. If you have unpaid invoices, you’re eligible for factoring.

• Are your payment terms under 90 days?

In order to factor invoices, the payment terms should be 90 days or less. In addition to the length of a payment term, invoices must already be issued.

• Are your invoices unpledged and free of tax liens?

The invoices you factor should not be pledged as collateral to any other institution. Your business must also be free of tax liens. However, if you have a business tax lien, you may still qualify if you have a payment plan in place with the taxing authority.