Debtor credit check
A review of the account debtor payment risk before the factor approves invoices.
Why it matters
Credit approval of the account debtor determines funding eligibility and the advance rate for invoices from that customer. Factors check business credit databases, public lien filings, payment history, and industry risk profiles to set credit limits. A debtor credit check may be declined if the customer is in financial distress, has a history of payment disputes, or operates in a sector the factor considers high risk. The outcome of the credit check directly determines how much of the seller receivables from that customer can be funded at any time.
How it appears in contracts
Debtor credit check procedures are referenced in the Credit Approval section of the factoring agreement. Sellers typically submit new account debtors for approval before funding invoices from those customers. The agreement specifies the expected response time, usually one to three business days, and what happens if the seller submits invoices before approval is received. Credit limits may be changed at any time without advance notice in many agreements, so sellers should monitor approved limits through the factor portal and verify availability before submitting large invoice batches from a single customer.
Related terms
Related reading
Sources
- International Factoring Association - International Factoring Association. Accessed 2026-05-19.
- Secured Finance Network - Secured Finance Network. Accessed 2026-05-19.