Accounts Receivable Loan
For a business owner in need of funding to keep their business running, the approval process of an accounts receivable loan is a scary process. If the loan isn’t approved, how can I make payroll next week? You don’t want lose sleep over questions like that.
The underwriting of a business loan isn’t a mystical process. There isn’t a man behind the curtain pulling strings arbitrarily. It’s simply a process of reviewing the business and its owners to ensure that the loan fits within the risk profile of the lender.
Factoring Online
What’s Involved in the Approval Process?
Think of the approval process as an interview. The finance company just wants to get to know you and see if you’re a good fit. They will ask for information about your company such as the corporate documents as well as information to verify the identity of the owners and officers. If you’re working with a company that does factoring online, you should be able to submit all of your documentation electronically.
The finance company is concerned about two things. First, they want to ensure that they will be able to secure their interest in the collateral. They do this through a lien filing. They will want to make sure there aren’t any liens already in place.
Second, they want to feel confident that the loan can be repaid. In factoring, much of the repayment burden falls on your customers. Thus, barring very serious issues, strong customer credit generally outweighs weak company credit.
Knowing this, what can you do help with the approval process? What can you do to give yourself the best chance for approval? You need to be timely, be prepared and be honest.
1) Provide Information in a Timely Manner
When you’re trying to get funding in place quickly, it’s essential that you provide information in a timely manner. If finance company is waiting days for you to provide paperwork or answer a question, it may prevent you from receiving the funding you need in time.
If you have reason for the delay, be sure to communicate that with the person who is working on your application. That will allow the finance company to work around your schedule which will help you get funding more quickly.
2) Be Prepared to Explain Issues
There’s a good chance that some type of issue with be uncovered during underwriting. Just because there’s an issue it doesn’t mean that you’ll be unable to get an accounts receivable loan; however, you should be prepared to explain problems in your past.
The underwriter will be looking at credit information on the company and the guarantors. They will be looking at things others have said about you or your company. They will be looking for any tax issues, lawsuits and liens.
Issues like this don’t automatically cause you to be declined. The reasons surrounding the problem and your explanation will often be the determining factor. Unless the underwriter finds an issue that you were unaware of, you should be prepared in advance to address issues in your and your company’s past.
3) Be Honest
This follows the previous point in that when you are talking through issues, it’s essential that you are honest. The finance company will be pulling public records, reviewing legal documents and examining data from various third party sources. In addition, there is a wealth of information that’s public on the internet.
You’ll go much farther in getting an accounts receivable loan by being honest. It’s rare that you’ll be approved by skirting around the issue; though, clearly and honestly explaining the situation may make it a non-issue.
Working to get invoice funding shouldn’t be a scary process. You should feel comfortable working with the finance company through the application process knowing that they just want to understand you and your business.
