Factoring Credit Check Process

Denise Messang
Posted by Denise Messang on Jul 16, 2019 9:43:00 AM

Checking the credit of every company and potential customer you work with should be the first thing you do before agreeing to new business. However, at UC Factors, we have found this mentality is not always prevalent.

Many companies, especially new or growing companies, just want the new business in any form they can get it. However, not all business is good business and if you choose invoice factoring as a form of funding for your business, performing a credit check is a must.


Many companies don’t understand how extending credit terms can impact their company if they don’t do credit checks on who they extend terms to. They believe that every new customer will pay each time, but this is not the case. 


Even companies who are aware of how credit terms can impact their company might not be aware of how extensive and costly the credit check process can be. It would be a large expense for a company to run their own credit check on every potential customer, not to mention time consuming.


This does not even include analyzing the information after the report has been ran to approve or deny the potential customer based on their creditworthiness.


As an invoice factoring company, we know that many businesses will not pay, either due to lack of funds or fraudulent motivations. By performing credit checks on every company our clients do business with, we can ensure that they are working with customers who will pay their invoices in full on time. We also take the burden (and expense) of checking and analyzing credit off of our clients' plates since these checks are included in their invoice factoring contract.


However, there is a right way and a wrong way to run credit checks on potential clients. We would caution any business that is working with a factoring company to make sure their methods produce secure and reliable results so you know that each new customer is worth doing business with.



How do other factors run credit checks?

One of the more important features in a factoring system is credit checking the companies that are going to pay the Client’s invoices. Frequently, factoring companies take an unreasonable amount of time to accomplish this task because they are not adequately staffed and they get backed up.


The impact on their Clients is that opportunities can be lost if they don’t act fast enough deciding to approve credit. Other factors claim to have systems in place that will give credit feedback instantly. They make this claim because they are not really checking credit. They are using stale information received months or even years ago.


These are not accurate credit checks and are usually the product of factors that are purchasing invoices on a full recourse basis so they are not taking any credit risk and they are holding the credit extensions down to a small figure. The obvious effect of this policy is Clients are taking an unreasonable risk depending on unreliable information.



What makes UC Factors’ credit checks different?

UC Factors does it the right way. We will check credit at the fastest pace possible while analyzing all information available. We have specialists dedicated to satisfying our clients’ needs for a fast turnaround.


We have three professional credit sources that are consulted as well as our personal credit files that are built on first-hand experience. We don’t stop there - we also check various websites like The Secretary of the State the business is located within to verify their corporate structure and year of business.


Depending on the industry, we have other sources we must check to verify that they are meeting the requirements of the industry. We don’t know in advance what we are going to find or where we are going to find it so we can’t promise a specific amount of time.


We will get the job done quickly and accurately so our client relies on dependable information. It is rare that we take longer than an hour because we always assume our Client needs this information as fast as possible.




As a new or growing business, you don’t have time to waste on unreliable customers or slow credit checks. As you do your research on factoring companies, make sure you choose one like UC Factors with dedicated credit specialists who will produce quick and reliable results each time you need a credit check on a new potential customer.


This will allow you to not only see funding quicker but to be secure in the knowledge that you are doing business with reliable companies who will pay their invoices each time.


Make sure you are working with a company who will perform credit checks quickly and correctly. Learn how to choose the right factor for your business here:

How Do I Choose a Factoring Company?

Topics: Factoring FAQ

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