Search this phrase and you will find a hundred pages written for a business wondering whether it qualifies. This is the other version. What should a funder require before money leaves, and what does each requirement actually buy.
The useful discipline is not the list. Every experienced underwriter has a list. The discipline is being able to say, for each item, what loss it prevents and what it costs to skip. A requirement nobody can justify is a requirement that gets waived under pressure, and the pressure always arrives on the deal you least want to lose.
Requirements fall into three tiers, and the mistake most operations make is mixing them.
Tier one: before any money moves for this client
These are conditions of the relationship. They are established once, at onboarding, and they should be incapable of being waived by anybody.
A signed agreement with operative assignment language. Not a signed agreement. A signed agreement whose assignment provisions actually do what you need them to do in the jurisdiction the client and the debtors sit in. This is the foundation for collecting in your own name and for enforcing when the relationship goes wrong.
Perfection, filed and evidenced. In the United States that means the search before you file, the filing itself, and a diary entry for continuation. A lapsed filing on a live client is one of the few genuinely preventable catastrophes in this business, and it happens because perfection is treated as an onboarding task rather than a monitored condition. See UCC filing for what it does and does not achieve.
Existing encumbrances resolved. A prior secured party with a blanket lien over receivables is not a negotiating position, it is a blocker. Subordination, payoff or release, obtained and evidenced before funding, not promised during it.
Entity and control verified. The entity exists, is in good standing, and the people signing are the people with authority to sign. Beneficial ownership identified to the standard your own policy sets. This is where a surprising proportion of outright fraud is stopped, because the fraud requires an entity that does not survive being looked at.
Bank account ownership evidenced, under a human only hold. The account you will send money to belongs to the client. Then the more important control: any subsequent change to that account requires human verification through a channel other than the one the change request arrived on. Payment redirection is the most reliably profitable attack on a factoring company and it does not require sophistication.
Anti assignment clauses reviewed. The underlying commercial contracts between the client and its debtors may prohibit or restrict assignment. Government contracts have their own regime. Discovering this after notification is expensive in a way that is difficult to unwind.
Tier two: before this specific receivable funds
These are conditions of the item, and they are checked every time.
The obligation exists and is accepted. Goods delivered or services performed, and accepted by the debtor without dispute. This is what verification is for, and it is the single control that separates funding a receivable from funding a document.
The supporting documents agree with each other. The invoice, the purchase order, the proof of delivery, the rate confirmation, the signed timesheet. Not each individually valid. Mutually consistent. A difference between the agreed rate and the invoiced amount is a routine finding and occasionally the first visible sign of something much worse.
The debtor is approved and within limit. A credit opinion becomes an operating rule at this moment or it does not become one at all. Include exposure to the same obligor arriving through other clients, which is the version that gets missed because it does not appear anywhere in this client's file.
It has not been funded before. Duplicate and near duplicate detection, within the client and across the portfolio. The same invoice with a changed number, the same amount to the same debtor on the same day, an invoice resubmitted after a chargeback. This check cannot be performed by reading a document. It requires comparison against everything you have already bought.
It is currently payable. Retainage, progress billings not yet certified, and pre billed services are receivables that are not yet owed. Funding them as though they were ordinary invoices is a construction and staffing specialty and it is expensive.
Terms are within policy. An invoice with terms far longer than the client's norm is either a commercial change you did not know about or an invoice that will age into a chargeback.
Tier three: monitored continuously, never re established
The third tier is the one most operations do not have, and it is where the losses now concentrate. These are conditions that were true at onboarding and stop being true quietly.
Dilution movement against the client's own history. Payment velocity by obligor, which deteriorates before anything reaches an aging bucket. Concentration change, including exposure under one debtor name across several clients. Invoice size deviation against the client's own median. Unusual submission timing. Missed promises in collections. Availability compression and how many days until it reaches zero. Credit limit utilisation. Verification exceptions accumulating in a pattern rather than individually.
None of these are events. They are movements, and a system organised around recording events will not show them to you. Continuous underwriting exists for precisely this: re underwriting on every material event rather than at review dates, and reporting confidence and coverage separately so a thin answer is visibly thin.
An example of why the tiers matter
A client passes everything at onboarding. Strong entity, clean searches, a debtor with an excellent payment record, invoices verified. Funding runs for months without incident.
What nobody captured is that the debtor is also a supplier to the client. When the commercial relationship deteriorates, the debtor sets off what it owes on the invoices against what the client owes it. The receivables were valid, verified and eligible. They are now worth a fraction of face value and the advance is unsecured in practice.
A contra relationship is a tier one question that most intake processes never ask, because it is a question about the client's payables rather than its receivables. Ask it at onboarding, and ask again when a debtor's payment behaviour changes shape rather than simply slowing.
Two rules that make the list survive contact with a busy week
Nothing in tier one may be waived by a person under revenue pressure. In a well built operation these gates are not advisory. The machine may stop money on its own, and only a named human may let anything through, with four eyes applying by default. That asymmetry is the whole basis of safe automation in this industry, because declining to fund while a question is open is cheap and reversible, and funding is neither.
A captured fact is not a verified fact, and the difference has to be visible. Plenty of information arrives in your system without ever being checked by anybody: an insurance certificate, an authority number, a stated safety record. Recording those is useful. Treating them as verified because they are on a screen is how an operation ends up believing something no person ever confirmed. A system that refuses to assert what it has only captured is more useful than one that presents everything with the same confidence.
The onboarding sequence, including where each of these gates sits, is described on client onboarding. How eligibility rules turn into an actual funding decision is on borrowing base, and the document side of tier two is on document intelligence.