Factoring Structures – Confidential / Non-Notification Factoring

Some businesses prefer to keep their financing arrangements private – especially if they have sensitive customers or want to maintain a certain level of discretion. For those situations, there’s something called non-notification invoice factoring.

It’s not easy to qualify for – in fact, very few companies do. Most factors shy away from it because it goes against the standard practice of notifying customers that invoices have been assigned. When it’s approved, it works like a traditional factoring agreement but includes a Non-Notification Rider, which spells out exactly when and how the factor will avoid sending a Notice of Assignment. The terms are strict, and breaking them can instantly trigger formal notice to your customers.

There are typically two ways non-notification factoring is structured:

1. Silent payments: Customers don’t receive a Notice of Assignment, but their payments are made under your business name and routed to the factor’s lockbox.
2. Client-collected payments: Customers aren’t notified at all, and you continue collecting payments yourself – with a very tight deadline to report collections and forward the funds to the factor.

To even be considered for non-notification, a factor will usually look for:

• Strong, consistent financial statements (reported monthly)
• Qualified accounting staff
• At least five years in business
• A solid track record with customers
• Low concentration (no single customer over 20%)
• Excellent personal credit from the owners
• Highly creditworthy debtors
• Clean, well-documented paperwork supporting every invoice
• A manageable number of customers with large invoice values

While the factor still verifies invoices and monitors performance, they’ll often do it quietly – through BCC’d e-mails or a hidden e-mail monitoring address – to preserve confidentiality.

Because of the extra risk and complexity, non-notification factoring usually comes with a higher discount rate and sometimes a lower advance rate. It’s a niche option, but for a demanding business, it can provide working capital while keeping financing relationships under wraps.