Click to listen to this article
So you’re thinking about using an invoice factoring service.
That’s great! We are happy to help you along with that process.
But… did you know that there is a list of things you and your business must have in order to receive funding from a factoring company?
If you want to get the process started and begin funding as soon as possible, make sure to have these common invoice factoring requirements on hand.
The Most Common Invoice Factoring Requirements
- A factoring application
- An accounts receivable aging report
- A copy of your Articles of Incorporation
- Invoices to factor
- Credit-worthy clients
- A business bank account
- A tax ID number
- A form of personal identification
An application is one of the most important requirements for invoice factoring. Applications vary depending on the factor’s needs, but most of them ask for things like business and personal phone numbers, email addresses, and business details.
Applications also normally ask for your business’ industry sector and your monthly invoicing volume. The more information you provide when filling out an application, the more accurate the invoice factoring quote will be, so be as detailed as possible.
Accounts Receivable Aging Report
Another document required for factoring is an accounts receivable aging report.
This report lists out unpaid invoices, credit memos, and notes by date. Accounts receivable aging reports may also be referred to as a schedule of accounts receivable or just a schedule.
Factors use this form to keep track of what invoices are outstanding, how much money is due, and when they will receive payment. This report is an important part of the factoring paperwork. You and your factor will determine an appropriate timetable for submitting the necessary paperwork.
Copy of Articles of Incorporation
In order to qualify for invoice factoring services, you need to provide proof that you have a legally documented business – which means you must have a copy of your Articles of Incorporation on hand. This proves the legitimacy of your business to the factoring company.
Grab a copy and make sure it lists your company name, address, etc.
Without proof of the legal creation of a corporation, you will be hard-pressed to find a legitimate source that will provide you with funding.
Invoices to Factor
By far the most important thing needed to qualify for invoice factoring is unpaid invoices. Without these, you will not be able to factor. Period.
Credit-worthy clients are another very important requirement for invoice factoring.
Unlike a traditional bank loan, invoice factoring approval does not rely on the credit of the business seeking funding, but the credit risk of the clients they invoice. A sure-fire way to qualify for factoring is to have unpaid invoices from large, credit-worthy clients.
You will receive bonus points if the client has been in business for several years or is a household name, like a specific hospital or retail chain.
Business Bank Account
If you’re using an invoice factoring service, you want funding. If you want funding from a factor, you are going to need a business bank account.
Factoring companies do not give out cash and do not transfer to personal bank accounts. Invoice factoring requires their clients to have a business-only account where they can send their wire or ACH transfers.
Tax ID Number
Another requirement for invoice factoring is a government-issued tax identification number, usually called a social security number.
The factoring company will use your tax ID number to check that you or your affiliated company are up to date on tax payments. The factor will also check to see if you or your company have any outstanding liens.
Personal identification is a crucial document for invoice factoring so do not overlook this step!
Factoring companies need a way to ensure the person they’re going to send money to is legitimate. Personal ID can be anything from a driver’s license to a passport to a social security number.
Industry Specific Invoice Factoring Requirements
Some industries have different guidelines for what factoring paperwork they require a business to provide before they factor.
Examples of documents required for factoring within certain industries include:
- MC/DOT Number
- Proof of liability insurance
- Workers’ compensation
After approving your invoice factoring services application, most funders will tell their customers exactly what factoring paperwork and identification they need. However, it pays off to have all the documentation ready in advance. The earlier you can send these things to your factoring company, the sooner you can get paid!
Some of these documents may need to be generated by your company or requested through a government agency, which can take several business days. Prepare ahead of time and pave your way to faster funding!
Still unsure if factoring suits your business?
Our factoring specialists are waiting to answer your questions.
Ready to get started?
Get your free, no-obligation quote by filling out our online form!