Factoring Blog

Common Factoring Application Mistakes

factoring application problems and mistakesA large number of applications that are submitted by factoring prospects tend to be incomplete and have many mistakes. As you can imagine, submitting an incorrect application will decrease the chances of getting funding.

You should make every effort to provide an application that is as accurate as possible. Think of the application the same way you would think of a resume – would you hire a candidate who submitted a resume that had mistakes and inaccurate information? Would you hire someone who submitted a sloppy application?  Clearly not. In the same vein, would a factoring company finance a business that submitted an application that had mistakes and inaccurate information? Not very likely.

The most common mistakes

The following is a list of the most common mistakes. As you will see, these can easily prevented:

  • Illegible applications: Many applications are filled out by hand. This is perfectly fine. However, a number of they applications we get are illegible due to sloppy handwriting. Submitting an application that is barely readable does not look professional and will likely result in delayed processing at the finance company. There is a simple solution to this Use your best hand writing and ideally use block letters. Or, just ask for an application that can be filled out electronically.
  • Incomplete applications: The second most common mistake is receiving incomplete applications. These applications that are missing critical information and have sections that are left blank. If you do not have the information is being requested, you should clearly note it in the application along with a brief explanation about it. Otherwise, you risk having your application delayed – or worse – rejected.
  • Missing documents: Most applications usually ask for documents to be submitted with it. Some examples of these documents include accounts receivable aging reports, articles of incorporation, and other pertinent information. It’s not unusual for applications to be received without some, or all, of these documents. Again, this will likely result in a delay or a rejection. Factoring companies really need this information to process the application and won’t be able to proceed until they get it.
  • Intentional misleading Information: This is the worst kind of mistake and one that will almost definitely lead to an application be rejected permanently. This often happens when a prospect has something negative in the background that they want to keep from the factoring company. For example, an application may ask if the company has had a previous bankruptcy. In this case a prospect answers no, even though the company has been through bankruptcy in the past.

The first three mistakes are fairly easy to avoid. Just be careful when you fill out the application and make sure that you’re following all the instructions. If there is information that the finance company is asking for that you do not have, you’re better off notifying them about it up front. This will allow them to take that into account and perhaps ask for  alternate information.

But, what to do if your application is not perfect?

What if there is something in your background that you believe will lead to your application be rejected? Some prospects make the mistake of omitting the information from the application, with the hopes that the factor will not find out. Others, simply provide inaccurate information. Both cases will ultimately lead to your application being rejected. Factoring companies crosscheck all application information with public sources. Finding out discrepancies/inaccuracies is relatively easy. Your chances of getting around this one are slim to none.

However, there is an alternative. Most factors are used to working with companies that have or have had cash flow problems, tax problems and legal problems. Having those will not automatically disqualify you – especially if you are upfront about them. For many prospects, the better alternative is to disclose these problems in a professional manner. Most factors will respect that and will provide you an honest assessment of your situation. They may also provide you with strategies – if they can – to get around these issues so that they can provide the financing that you need. And if they cannot fund you, it’s probably best that you find out sooner rather than later so that you can look for an alternative avenue.

You may also be interested in increasing your chances of getting factoring and in factoring application success strategies.

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