Background Checks for Invoice Factoring

Up to this point, our coverage of the factoring paperwork you can expect to encounter has been focused on documents that your factor will send to you. Today, we discuss a different element of the due diligence process that is equally and in some cases even more important for securing approval: the background check.

Many companies use background checks to verify the identity of a potential employee or client. In this case, the factor with which you are working will submit your information to their preferred company for running background checks and will review the report they receive as part of their verification process. If your company has multiple principles, the factor will likely request a background check for each.

What do factoring companies look for in a background check? 

“Trust and verify” is a central concept to the success of invoice factoring. While factoring companies are more concerned with your customers’ credit history for approving and establishing funding limits, they also want to have a solid grasp on who is collecting their advances.

A background check will provide the factor with basic information about you: your current address and previous addresses; known or suspected associates (usually family or roommates); and any legal background you may have (criminal, civil, and financial). Of the information they receive, most factors are primarily interested in identifying information that suggests the potential for complications in your factoring relationship.

For example: if a background check uncovers that a prospect has a criminal history involving financial crimes such as check fraud, that will present an obstacle to funding because the factoring company will be reluctant to place their trust in the prospect.

If you want greater clarification about what your specific factoring company looks for in a background check, don’t hesitate to ask your contact in the company.

Will issues in my background check keep me from getting approved? 

Barring an extreme situation like the example above, issues in your background check such as a prior bankruptcy will not typically mean an immediate denial of your account. However, if there are such issues the factor may bring them up in a subsequent conversation to gather context about the circumstances.

As always, honesty is the best policy. In fact, you can use your background check as an opportunity to build greater trust with your factoring company by alerting them to any potential issues they may find on the report. Even if your information does not ultimately impact their decision process, you will demonstrate to the factor that you are committed to a transparent relationship – always the best kind.

We know how to get your business approved for funding within 3-5 business days. Contact us today to speak with one of our invoice factoring experts and get a same-day quote.