Pre-approval

What Is Pre-approval in Financial Factoring?

Pre-approval is an important step in the financial factoring process. It's when a factoring company evaluates a business to determine if it can provide financing. This check happens before any invoices are actually sold. During pre-approval, the lender looks at the creditworthiness of your clients and your company’s financial health.

Why Is Pre-approval Important?

Getting pre-approved gives you confidence. You'll know early on if you can access the funding needed to grow your business. With pre-approval, you can plan ahead and make decisions with a clear view of your financial options.

How Does Pre-approval Work?

The factoring company will review your business records, invoice samples, and check your client's credit scores. They will also assess your company's ability to meet the obligations of the factoring agreement. If you get the green light, you receive a letter stating the amount you are pre-approved to factor, and the terms involved.

Benefits of Pre-approval

Pre-approval smooths the way for quick funding once invoices are generated. It helps to reduce delays, as there's already an agreement in place. This can be a game-changer for managing cash flow and capitalizing on business opportunities as soon as they arise.

Conclusion

Remember, pre-approval is just the first step. It does not guarantee funding, as the actual invoices still need to meet the factoring company's requirements. But, it is a valuable indicator of how much funding you could secure, helping to steer your financial strategy.