subject: Building Credit through Factoring [print this page] . The transaction is modeled as a buy-sell transaction. The steps for this type of factoring include:
- The Performance of Due Diligence: After being approached by a prospective client, a factor undertakes a thorough due diligence program that typically takes from 24 to 48 hours.
- The Review of Invoices: Once this due diligence is completed, the client is at liberty to offer invoices to the factoring company for purchase.
- A Credit Verification: After the receipt of the invoices, the factoring company will check the credit of the debtor named on each invoice and make sure the sale represented by each invoice has been satisfactorily complete.
- The Debtors' Notification: Once credit has been verified, each debtor is notified of the purchase by the factor and the client is paid for the invoices.
- Debtor Payments: At the end of the credit period the debtor will make payment directly to the factoring company, thus completing the transaction.
