Factoring pre-application checklist
Use this checklist before applying to a factoring program. Gathering these items in advance can reduce delays during underwriting. This is educational only and is not legal advice.
Business documents
| Item | Plain-English check | Note |
|---|---|---|
| Confirm you have a current, signed copy accessible for submission. | Some factors require original or certified copies. | |
| Locate your IRS employer identification letter before applying. | A missing EIN letter can delay underwriting. | |
| Gather statements for all accounts the factor may review. | Incomplete statements slow the approval process. | |
| Prepare a current aging report showing all outstanding invoices by customer and age. | Factors use the aging report to assess invoice quality and customer concentration. |
Customer readiness
| Item | Plain-English check | Note |
|---|---|---|
| Identify which customers you intend to factor and note their average payment days. | Slow-paying or frequently disputing customers may not be approved for funding. | |
| Collect any contracts, purchase orders, or master service agreements with factoring candidates. | Factors may require proof that the customer relationship and invoice obligation are documented. | |
| Confirm you understand that the factor will review your customers' credit, not just yours. | Customers with weak credit or disputed payment histories may receive lower or no credit limits. | |
| Check whether any customer contracts restrict assignment of receivables. | Anti-assignment clauses in customer contracts can prevent factoring of those invoices. |
Invoice documentation
| Item | Plain-English check | Note |
|---|---|---|
| Prepare representative invoices from each customer you intend to factor. | Factors review invoice format, terms, and documentation to assess eligibility. | |
| Confirm you can produce delivery receipts, signed BOLs, or acceptance confirmations for recent invoices. | Invoices without proof of delivery or acceptance are typically ineligible for funding. | |
| Identify whether your factoring candidates have underlying purchase orders. | Factors often require a matching purchase order before funding an invoice. | |
| Document all known disputes, short pays, or pending credits before applying. | Undisclosed disputes can affect advance rates or trigger chargebacks after funding. |
Program terms to confirm
| Item | Plain-English check | Note |
|---|---|---|
| Search for any existing UCC filings naming your receivables as collateral. | A prior lien must be released or subordinated before most factors will fund. | |
| Review whether any existing loan or credit agreement requires notification before adding a factor. | Some bank credit agreements contain cross-default or notification clauses triggered by factoring. | |
| Estimate what percentage of revenue comes from your top one or two customers. | High concentration may reduce the amount a factor will approve for that customer. | |
| Calculate average monthly invoice volume to compare against any minimum volume requirements. | A minimum that exceeds your normal volume creates a fee obligation during slow periods. |
Questions to ask before applying
- Which of my customers will the factor be willing to approve for credit?
- Does any existing loan agreement restrict or require notification for factoring?
- Are any of my customer contracts silent on assignment, or do they restrict it?
- What invoice documentation is required beyond the invoice itself?
- What is the minimum monthly volume and what happens if I fall short?
Sources
- Uniform Commercial Code Article 9 - Uniform Law Commission. Accessed 2026-05-19.
- UCC Filing Search Information - National Association of Secretaries of State. Accessed 2026-05-19.
- International Factoring Association - International Factoring Association. Accessed 2026-05-19.
- Secured Finance Network - Secured Finance Network. Accessed 2026-05-19.
Financial disclaimer. This page is educational only and is not financial, legal, tax, accounting, or credit advice. Factoring terms vary by provider and contract. Read the full disclaimer.