What Can Affect Your Ability to Access Invoice Factoring


Many businesses know the benefits of factoring invoices and will hence use this method regularly to resolve any cashflow issues that they might have. According to the experts at Utah invoice factoring  company Thales Financial, when used correctly invoice factoring has many benefits. However, there are some limits to how it is used. Moreover, ability to access invoice factoring can sometimes be limited. There are a number of reasons for this, some of which we will discuss below.

Factoring the Same Customer’s Invoices

A factoring company prefers not to factor invoices from one customer only. So if you have a contract with a finance company that requires you to factor a specific amount each month, it may be necessary to factor invoices from a variety of customers rather than trying to factor one large invoice from a single customer. The reason for this is that should your customer go bust, the finance company may lose money. This is typical if you have a non-recourse agreement where the finance company is responsible for non-payment of customer invoices.

Customers Have Poor Credit

If a factoring company checks the credit history of one of your customers and finds that it is poor, or that they have a history of paying late or not paying some of their debts, they are unlikely to accept an invoice from this customer.

Disputes with an Order

A factoring company might refuse to factor an invoice if there is any type of dispute with the order, such as quality of the goods or a late delivery. If there is a risk that the customer will be issued with a credit note against the invoice, then the factoring company might not accept the invoice when it is submitted. The same is true for incomplete orders. A factoring company will not accept any invoice that has the potential for problems.

Your Customer is Unhappy About Invoices Being Factored

While most businesses understand the need for invoice factoring and don’t have a problem with it, others are not happy when a business factors their invoice. This is often the case for more established companies that have specific processes in place and that don’t want to change the way they make their payments. Nevertheless, the reality is that factoring companies usually have a variety of payment methods available and will work with customers to find a suitable solution.

How to Make Factoring Work for Your Business

If you want to use invoice factoring as a way to address any cashflow issues your business may be having, then it is important to adhere to the terms of your contract. The factoring company is likely to want you to diversify the invoices that you send to it every month. It is best to submit invoices from customers that tend to pay on time and that will not have an issue with their invoices being factored. The quicker a customer pays its invoice, the less you will pay to the factoring company in fees.

Submitting invoices from late payers is never a good idea, no matter how much the invoice is for. This is because your contract will likely have a stipulation that you will be charged interest for late payment of invoices by customers. This interest might increase daily or every 10-30 days, depending on the contract, so it is not in your interest to use these invoices.

To conclude then, invoice factoring is a quick and easy solution to a business’s cashflow problems, but there are some limitations that you need to be aware of. Checking your contract will ensure you make it work for you and your business.