Factoring provides small businesses with an opportunity to streamline their administrative workloads while also accessing a reliable source of working capital. It does so without creating new debt on your credit report, too, so it is often the most effective source for capital for operations or even just regular cash flow. For first-timers used to loan applications, there is a bit of adjustment to the new process, however.

Application Necessities

Since you are not taking out a loan against an asset you are selling debt to a third party, your credit score and income do not matter the way they would for a loan. Instead, factors typically ask to see the invoices they are buying alongside proof of the customer’s payment history. If you sell all your invoices this may mean you still wind up disclosing practically all of your income, but if you are only factoring a cross-section of them then those are the payment histories that matter.

You will also need to provide basic information about your business like its address and licensing or insurance status. The exact requirements differ from one factor to the next, but one thing is quite common. Most of the time you are asked for a quick application upfront, then for additional documentation of your operations once a tentative approval has been made.

One on One Communication

Unlike some application processes for debt financing, factors tend to prefer some direct negotiation and communication, especially when you are setting up your first sale of invoices to a new organization. Being responsive to requests for more information and knowing the range of options available through a particular factoring program is the key to getting fast approval and beginning a mutually beneficial working relationship.

Approval Timelines and Cash Distribution

If you sent everything as requested for each round of application review and have no major points to negotiate in the final agreement, you can get your first round of invoice processing done in less than five business days. When it takes longer, that tends to be because the applicant is not providing responses to requests as quickly as they could. Remember, financing companies and factors both make their money on closed deals, so they will be working as fast as they can.

Once you are used to the process and you have a relationship with a single source for factoring, you can often get a round of invoices processed in just a day or two, with cash distributed another day or two after that. This allows you to really predict when your large working capital influxes will hit over a quarter and better plan your company’s use of its cash on hand.