As part of your factoring contract, the factor will set certain limits as to the type, volume and value of invoices which it will accept, along with agreed timescales for payment. This is done to ensure the agreement is financially worthwhile for both parties (for example, submitting numerous small invoices may prove to be uneconomical). The factor will usually set credit limits for each customer based on their own credit rating systems which are in turn based on their assessment of the risk of nonpayment posed by each of the customers whose invoices you’re submitted for the factoring arrangement. This is especially true for a non-recourse agreement where the factor takes on any unpaid debts.
An additional question: Respond to this Question
- How can factoring help my business improve cash flow?
- What are the requirements for factoring?
- Can I pick and choose which invoices are factored?
- What's the difference between factoring and invoice discounting?
- What does a typical factoring contract contain?
- How much cash will I get up front for my invoices?
- What is reverse factoring?
- What are the different types of factoring?