Shocking as it may seem factoring is not the same as hard money lending. Factors do not prey on the weak and bleed out their clients. Factors are in a relationship for the long haul and they want to see their clients succeed. A successful client = a successful factor.
Also unlike hard money lenders, factors are not the lender of last resort. In other words, a company should not be in dire straits to consider using factoring. It is incorrect to say that after a business exhausts all avenues for capital they should finally seek invoice factoring. The truth is factors are picky! Yes you read that correctly – FACTORS ARE PICKY! There are plenty of times where a factor will turn down a deal. Even though the factor ultimately decides to fund on the creditworthiness of the account debtor (customer), the borrowing client must show some financial wherewithal and businesses acumen to remain in business. Under-funded businesses, poor accounting, lack of proper documentation, unclear billing processes, horrible personal credit history, all can contribute to a turn down.
Factoring is after all a business, and like any other type of business a factoring company wants to avoid hassles and headaches. Poorly run companies will end up being more trouble and a drain on the operations of the factor.