Whether you own a small start-up with no credit history or you work for a company that has had its financial ups and downs, you may find that your credit score and payment history can prevent you from securing traditional loans. The good news is that many businesses that have been turned down for traditional loans or lines of credit qualify for a proven, no-debt cash flow solution: accounts receivable factoring.
With their increasingly restrictive lending policies, banks and other institutions require strong credit histories and significant collateral. Instead, factoring companies focus on a company’s customers’ credit background, not the credit score and payment history of an applicant for factoring. The underwriting specialists look at the applicant’s customers’ payment histories. If the applicant completes work for customers that can be counted on to pay their bills in a timely manner, the applicant has a higher likelihood for acceptance and desirable factoring rates. This opens new doors for those startup companies and businesses with less-than-perfect credit – and lets them access the working capital they need to maintain and grow their business.
The creditworthiness of customers is so vital to the factoring process that well-established factoring companies have their own in-house credit departments that continually perform credit checks on clients’ customers. These departments are staffed by experienced credit professionals who rely on a variety of resources to research credit histories. Factoring companies with comprehensive online portals for clients can make getting credit checks on potential customers fast and easy: clients can simply input the customer’s name and information and the response is almost instant. Quick and accurate determination of the creditworthiness of customers is a key service offered by many factoring companies.
Most online credit checks are available for free to the factoring company’s client, although on occasion more labor-intensive credit searches can incur additional charges. In addition, large factoring companies with in-house credit departments can provide clients with phone consultation on specific situations.
Benefits of Credit Checks on Clients’ Customers
- Reduce losses
- Protects clients
- Provided free of charge, in most cases