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Non-notification factoring is a form of invoice factoring that minimizes interactions between the factoring company and your client. This enables clients to operate with fewer monitoring restrictions which makes the program more user-friendly. We can offer non-notification programs to select clients.
The problem with conventional financing
One of the main challenges for clients that choose a conventional factoring program is the requirement that the factor be directly involved in your collections process. At the start of the relationship, the factor sends your customers a notice of assignment letter, advising them that your invoices are being financed and alerting them of the new payment procedures they need to implement. Afterward, the factoring company regularly verifies your invoices to ensure that they are accurate and valid.
How is non-notification factoring different?
In a non-notification program, communications with your customer are minimized so that the factoring company’s involvement is almost transparent. When necessary, direct communication is done using your corporate image and letterhead. This approach improves the customer’s experience. These types of programs are also referred to as “confidential factoring” programs.
Advantages of non-notification factoring
The most obvious advantage is that it is easier to use than conventional invoice factoring because there is minimal factor involvement. The solution is similar to asset-based loans and lines of credit. Clients can use a non-notification program to build a track record and the move on to the other types of facilities.
How are invoices verified?
Invoices factored through a non-notification program still need to be verified. The factoring company contacts the customer using your identity. Phone calls are made using your corporate name, eliminating confusion or problems when contacting your customer’s accounts payable department and delivering a more streamlined experience.
How are invoice payments handled?
The payment is made in your corporate name and the envelope lists your company name next to the address. Payments made electronically, via ACH or wire transfer, can be sent to a special deposit account.
Costs Involved
Most non-notification programs are slightly more expensive than regular invoice factoring programs. However, the cost increment is usually small.
Who qualifies for non-notification programs?
Non-notification programs have more stringent requirements than conventional plans and are available to companies that meet certain criteria. Your company must:
- Be in the service or manufacturing industries
- Invoice a minimum of $250,000 per month
- Be able to provide 12 months of A/R statistics
- Be willing to factor all the sales ledger
- Have a well-diversified client base
- Have recurring clients (as opposed to one-off transactions)
- Have reliable controls and reporting
- Not be at risk of default or bankruptcy
- Have a reputable management team
- Meet additional requirements based on your transactions
You can see that when you come non-notification factoring with traditional factoring qualifications, these are stricter to qualify for. If you think this is the right option for your business and will help you keep your relationships with clients, then we encourage you to pursue the possibility.
The Bottom Line
At the end of the day, you will need to decide if this is the best option for you. If you are in an industry where having a Non-Notification Factoring Deal is a better option, then getting in touch with a factoring company to learn more information and get the process started is in your best interest. It can be slightly more costly and difficult to qualify for, but most factoring companies offer it as a potential solution.
Consider the differences between traditional factoring and non-notification factoring to make sure you are getting the best option for you and your business.
