An industry friend of mine recently told me the story of a prospect of hers that needed factoring rather quickly. The company had some financial problems but also had good potential. My friend and the prospect had also developed a good rapport so she thought there were a good match she wanted to move forward. Like many factoring financing companies, my friend’s company charges a due diligence fee to the customers. This is used to defer the expenses of going through all the reviews, searches and filings that are required before funding an account. The fee is just a couple hundred dollars and most prospects pay it by check.

In this case   the prospect’s check bounced.

What do you think happened next? When confronted by this, the prospect presented a number of excuses and explanations. I am sure they were all valid. However, my friend decided that her trust in her prospect had been compromised and decided not to move forward. Her logic was simple, would you invest money in the business of someone who bounced a check to you? Most likely you would not. She wouldn’t either…

What is sad is that it didn’t have to be this way. If the prospect would have been completely upfront about her financial situation, there was a good chance that my friend would have offered to take the due diligence fees out of first funding. Basically, from the first factoring financing transaction. My friends company (and many factoring companies) will provide this type of an accommodation to select prospects. All that the prospect needed to do was to be upfront about their situation and as for it.

I understand that for a prospect, being upfront about every detail of their business can be difficult because they risk rejection and many really need the funds and don’t want to run that risk. But consider the alternative, if you omit something that the factoring company then finds out you may lose your opportunity to get business financing from them forever.

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