Factoring Structures - How to Qualify

How do I qualify for factoring?

If you’re selling to other creditworthy businesses on terms (Net 30 to Net 90) and your annual sales are over $300,000, you’re actually a great candidate for invoice factoring.

Qualifying for factoring is simple. If your books are current (no more than 30 days behind), your accounts receivable and accounts payable reports are accurate, and you can provide the last 90 days of activity — you’re already most of the way there.

What Most Factors Will Ask for During Underwriting

When you apply for invoice factoring, the underwriting process is pretty straightforward. Most factors just want to get a clear picture of what your business provides, customer information and an overview of your accounts. Here’s what they’ll typically ask for:

A current Accounts Receivable Aging Report — both the summary and detail versions help them see who owes you money and how long it’s been outstanding.
A current Accounts Payable Report — usually just the summary format is fine, to understand what you owe to vendors and a review for contra accounts.
The last 90 days of bank statements — generally from your main operating account, to show cash flow activity.
A few sample invoices (3–4) — this helps the factor understand how and what you invoice for and the payment terms.
A customer list — with names, contact info.

That’s usually it. If your reports are up-to-date, getting through underwriting is quick and painless — often just a hour from start to finish.

When you’re working with a factoring company, there are a few standard reports they’ll want to review. Here are some best-practice tips to help you stay organized and make the process go smoothly.

Accounts Receivable Aging Report

Keep it updated weekly.
Reconcile your report every week to make sure everything lines up — new invoices are generated, customer payments are posted promptly, and any old or written-off bad debt is removed.

Send the right report to the factoring company.
Most accounting programs give you a few options for how to view your invoices:

By Due Date: This method keeps invoices in the “current” column until a day past the agreed terms. It makes your report look clean, but it doesn’t really show how long an invoice has been outstanding.
By Transaction Date: This approach starts aging an invoice from the actual date it was created — not when it’s due. It gives you a truer, more accurate snapshot of where your receivables really stand. Most invoice factoring professionals prefer this method because it reflects the true A/R position.

Accounts Payable Report

Reconcile Every Week. 
Keep your payables clean and current by checking them weekly. Make sure all new bills are entered, payments are posted, and any old or duplicate items are reviewed and cleared.

Review aging by Due Date. 
When reviewing your Accounts Payable report, sort or age by due date, not transaction date. This gives you the clearest picture of what’s coming up soon so you can plan payments and manage cash flow without surprises. Unlike you’re A/R report, use the payment terms offered by your supplier as an advantage.

Bank Statements

Most factoring companies will ask for your last 90 days of bank statements. They’re not digging for secrets — they just want to see how money flows in and out of your business. It helps them understand your typical cash cycle, spending habits, and overall funding needs. The goal is to tailor a financing solution that actually fits the way your business runs.

Sample Invoices & Supporting Documents

Sharing a few sample invoices and supporting purchase orders, contracts gives the factor a clear picture of what you bill for and how often. It also helps confirm that you’re invoicing after the work is completed (billing in arrears) and that your payment terms — like Net 30 or Net 60 — are clearly shown and make sense for both you and the factor.

Essentially, the more transparent and organized your documentation is, the faster and smoother the approval process will be. With the above information submitted, most factoring companies can underwrite in about an hour.

Additional Items a Factor Might Request

While most factoring companies ask for the same basic reports, it’s worth remembering that no two factoring companies operate exactly the same way. If the amount you’re looking to factor is larger — or if your company has a few bumps in its history, complex ownership, or ongoing business concerns — the factor may ask for some additional information.

These might include:

Financial statements – both interim and the last two fiscal year-end (FYE) reports.
Profit & Loss statement and Balance Sheet – to give a snapshot of overall business performance, financial reporting quality and financial health.
Cash flow projections – showing expected revenues and expenses in the coming months.
Business tax returns (last two years) – to verify reported income.
Personal tax returns (last two years) – typically for owners or guarantors.
Personal financial statements – from guarantors, to confirm overall financial condition.

Every factor’s process is slightly different, but having these documents organized and ready can speed up approval, provide comfort to the factor, speed up timing of funding and in many instances, influence structure.