How a Factoring Company Works

Many business owners have turned to alternative funding methods such as factoring, otherwise known as accounts receivable factoring, because it offers clients a "use it as you need it" funding option. Therefore every invoice purchase is a separate transaction and does not form part of a portfolio lending approach. The transaction is modeled as a buy-sell transaction.

A factoring company undertakes a thorough due diligence program that usually takes about 24 to 48 hours. Once the due diligence is completed, the client is at liberty to offer invoices to IFG for purchase. After receipt of the invoices, the factor will check the credit of the debtor named on each invoice and make sure the sale represented by each invoice has been satisfactorily complete.

Once credit has been verified, each debtor is notified of the purchase by IFG and the client is paid for the invoices. At the end of the credit period the debtor will make payment directly to the factor.