Background Checks for Invoice Factoring: Due Diligence & More

Are you looking for a reliable vendor of background checks? Factoring companies often are. Due diligence is a critical component of many types of transactions. Doing your homework keeps you informed and shines a light on potential risks and opportunities. One such operation that requires precise due diligence is invoice factoring – the process of a business selling accounts receivable invoices to a third party, or factor, at a discount.

In the due diligence process, a background check is an essential element to securing approval, used by many companies to verify the identity of a potential employee or client. In the case of factoring, the factor (the company deciding whether or not to buy the invoices) will submit a prospect’s relevant information to a third party that runs a background check. The ensuing report plays a significant role in the factor’s verification process.

What goes into background checks performed for factoring companies?

A concept called “trust and verify” is core to the success of invoice factoring. While a company’s customers’ credit history is the top concern for factoring companies when approving and establishing fund limits, it is also meaningful to know who exactly is collecting the advances.

Enter the background check. It provides the factor with the necessary information about its prospect: current address and any previous addresses, known or suspected associates, and legal history including civil, criminal, and financial. Factors are most focused on any material that implies potential complications within the factoring relationship.

For example, imagine a background check reveals that a prospective client has a criminal history, say check fraud. That presents a potential obstacle to funding as the factor could be reluctant to place trust in the prospect.

For a better idea of what exactly a factory company looks for in a background check, the best way to find out is to ask.

What issues in a background check might keep me from getting approved?

Unless linked to an extreme situation like the check fraud example, prior bankruptcy typically does not automatically disqualify a prospective client from getting approved. Such issues may, however, cause the factor to investigate a bit further to understand the context of the circumstances.

As you may expect, honesty is the best policy. Alerting a factor of any potential issues they could find in a background check builds greater trust between a prospect and a factor. The information you pass along will not have an effect on the final decision but will show the factor that you have a commitment to a transparent relationship.

All American Document Services is a national public records research company that is the top choice for due diligence work including background checks for factoring companies. We offer a vast portfolio of search products and delivery methods to suit any client’s needs.

For more information on our searches and services, please visit our homepage today!