Getting Brokers Approved for Factoring
Most factoring companies will require that a new customer, which in the case of transportation companies are usually brokers or shippers be pre-approved through some sort of credit screening, before an invoice for that customer can be submitted to the factoring company for purchase. There are important issues to consider in this process, and on this month’s blog post will take a look at some of them.
Although in a recourse factoring facility, you (the client) will be ultimately responsible for any credit risk of your customers, your factoring company will still most likely require you to pre-approve brokers before you submit an invoice for purchase, this serves 2 purposes: first to help you avoid unnecessary risks and second, to avoid situations where there might not be sufficient collateral to cover a potential credit loss. Your factoring company however, will most likely be more flexible on approving brokers under a recourse factoring facility, which could be an important advantage for you. On the other hand on non recourse factoring facilities, usually the approval process for customers will be more strict, because among other things, the factoring company might have a credit insurance policy in place for the non recourse accounts that could limit its ability to take on some risks.
At Little Mountain Logistics we have an automated system in place for our clients to check the credit standing of their potential customers and pre-approve them 24/7, free of charge and right from your online portal, just type the MC number and BAM!!! (See the screenshot below). But we are also available to do in depth reviews and discuss the risks we see with any new customer, so as to come to a decision that will result in your long term success.
