Non-payable invoices issued on account of the delivered goods or performed services are not the only documents that the Factor may ask about before establishment of cooperation. The rules for granting of financing within factoring are similar to the principles applied in case of credits or bank loans, even though they are not the same. What questions from the Factor can we expect?
Before the Factor makes a decision on granting of financing to the entrepreneur, it has to check the financial condition of the company. First, the basic data is collected and the current situation of the entity on the market is analysed. The Factor will certainly ask about the excerpt from the National Court Register or the certificate on the entry in the business activity record. It will also analyse the balance sheet and the profit & loss account. In case of keeping of the books in a simplified form, the submitted financial returns and the data from the revenue and expense ledger are analysed.
Additionally, the entrepreneurs that want to use the factoring service get special questionnaires. They are used for identification of the needs and expectations of the clients, so as to be able to adjust the financial product to the profile of a given company in the best way possible. The questions relate inter alia to such issues as: possessed experience in the field of the use of factoring, expected level of financing, lists of customers, balances of current and planned turnover.
Apart from examination of the creditworthiness of the entrepreneur, the Factor also checks the portfolio of their receivables. It assesses the financial condition of the customers in order to be then able to grant the financing limits. It is the basis upon granting of financing within factoring and an additional benefit for the company. Thanks to this verification, the entrepreneur gets the information that may protect them against conclusion of a risky contract. The Factor may also use the information got directly from the insurers. A failure to grant an insurance limit to the customer may entail a decision of the Factor on non-granting of the factoring limit.
Another issue verified by the Factor is documentation of the receivable. The agreement or the order binding the entrepreneur with the customer as well as the confirmation of receipt of the goods or performance of the service are analysed.
Although the procedure, which has been presented briefly, may seem to be time-consuming, it is conducted only once – before conclusion of the agreement and granting of the financial limits to the customers. Signing of the agreement guarantees continuous inflow of cash to the Factorer after presentation of an invoice issued to the customer covered by the financing.
Published on: 24 October 2016