There are many factors that play into being granted a line of credit with a more favorable interest rate, such as a good credit score or a strong annual revenue. However, these are not prerequisites for approval in invoice factoring. Factors are primarily concerned with your customer’s ability to pay, making this a more attractive feature to smaller, less-established businesses or businesses with a less than desirable credit score.
Factoring companies are looking at more than what you enter into their application. Follow these tips to make your company look its best to a factoring company:
- Take steps to increase your credit score
- While invoice factoring doesn’t emphasize your credit score, it is still important to monitor it and increase it every chance you get. For personal credit, there are services available that show you where your credit errors are and how to correct them. Additionally, every time a customer pays an invoice you have factored, you build your business’ credit history, thus boosting your credit score.
- Be transparent with your customers
- Factors cannot fund an invoice if your business and your customers are not on the same page. Confirm that your customer agrees that services have been fulfilled and there is a specific date for payment to be due that both parties have agreed upon.
- Document everything well
- Many factoring companies will ask for follow-up documentation to back up your invoices. Having this handy will keep the factoring process running as efficiently as possible. Moreover, make sure that all of your paperwork is complete, and no important details are missing, such as customer information.
- Register with your state’s Secretary of State
- Almost every factoring company will verify this information in order to ensure that you are a legitimate business. This also serves as an opportunity for factoring companies to screen businesses who might be in trouble for unpaid taxes.
- Let you and your business be found online
- Connecting your personal social media to your business shows factors that you are a real person. Maintain an active presence on social media from your business accounts also improves your visibility. You should also have an updated website that customers and factors can easily find to further demonstrate your legitimacy.
If you want to be one of the businesses that uses invoice factoring to your advantage, feel free to contact us at 800-233-8237 or funding@kovercapital.com.