Some of the secrets of factoring online part 4.  Verifications.

As a company considering factoring online, or as a current client of a invoice discounting company you have probably heard the term "verifications".

I thought a good topic for one of our Secrets bogs would be background on verifications.  Why they need to be done and why you should do everything you can to cooperate with your factoring company.

When you make a decision to factor your receivables with an online factor (or a traditional factor) you should be entering the relationship with the understanding that you are trading a little of your corporate independence for financing to which you would not otherwise not have access.  As the client of a factor you need to understand that the factor will have some contact with you customers.  If this is too intrusive for you then I would considering looking for another type of financing.  If you don't want your online factoring having any contact with your customers then your relationship with your factor is destined for failure and you are likely in for a fair amount of frustration.

Factoring companies use the term verifications to define a group of activities that factoring companies perform to ensure that the collateral they are lending against (your accounts receivable) is correctly valued.  All these activities include gathering information from 3rd parties. 

Once you decide to factor your receivables, then I would take the approach that you should be as cooperative as possible with your new factoring company in the verification process.  You will find that as long as your online factor is receiving positive verification results they are more likely to do "favors" for you that may be outside the scope of the factoring contract (click here some more information on factoring contracts).  Do yourself a favor and cooperate with your factor with an understanding that this is just a normal part of the process. 

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