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Factoring Criteria

Invoice factoring is a suitable form of finance for may businesses. But what are the criteria your business must comply with? In fairness they are fairly simple and there are 3 basic requirements:

  1. Your business must be providing a service or selling a product to other businesses. Factoring companies will only consider debtors that are business entities and will not lend against invoices that are to private individuals.
  2. You must be invoicing your clients on credit terms. Obviously if you are invoicing ‘Cash on Delivery’ there are no outstanding invoices to fund as the money is collected as the goods are delivered.
  3. Your business must be raising invoices in arrears of the goods being delivered or the service provided. For example if you were invoicing on January 1st in advance of a 12 month maintenance contract then this is viewed as invoices being raised in advance and this type of invoicing is not suitable.

Each lender has it’s own criteria relating to the status of directors, profitability of a business, how established the business is, the number of debtors that you have, etc.. However, if you comply with the 3 basic criteria described above there will almost certainly be an invoice factoring company out there that can assist you whatever your circumstances are.

Please also remember that as well as differing criteria, each lender has very different capabilities because of how they deliver their service. On that basis there will almost certainly be a lender out there who is best suited so meet your needs.

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