When a business considers accounts receivable financing, its objectives are often clear: improve cash flow, maintain operations, and position for growth. Finding a lender that understands your business can expedite the funding process and insure you get the best terms possible. But before funds are advanced and there’s one step that sets the tone for everything that follows: underwriting.
Whether your business is exploring financing for the first time or transitioning from another lender, understanding what underwriting is and what to expect can make the process more efficient.
What Is Underwriting?
Underwriting is the process by which the lender evaluates your business’s eligibility and determines how your facility can be structured. It goes beyond the initial application. This step looks at your business history, financial performance, and the quality of your accounts receivable. The underwriting process assesses risk, verifies documentation, determines whether your receivables support the requested financing, and establishes the terms of your financing.
Why It Matters
Underwriting is an important factor in building the right financing structure for your business.
Thorough underwriting helps protect both parties and ensures the financing is based on properly documented, verifiable receivables, not just assumptions or projections.
What To Expect In The Underwriting Process
Once your application is submitted, an underwriter begins a detailed review of your business. It's important to understand that a letter of intent (LOI) is not a final approval. The LOI outlines potential terms, but final approval and terms depends on the results of underwriting.
The review process can include:
- Evaluating recent sales history
- Reviewing customer payment patterns
- Confirming your legal structure and ownership
- Identifying existing liens from other lenders
- Reviewing credit history
You may be asked to provide supporting documentation such as:
- Sales history (e.g., prior 12 months, if applicable)
- A current receivables aging report
- Sample invoices
- Supporting documents (e.g., purchase orders, proof of delivery)
- Prior lending agreements
- Articles of incorporation and organization documents
Delays may occur if there are multiple UCC filings. These filings do not always mean prior debt is still outstanding, but they must be addressed before a new financing agreement can be finalized.
What Underwriters Want Businesses To Know
Businesses don’t need perfect financials or spotless credit to qualify for financing. Underwriting is about truly understanding your business as it is.
If your business has experienced challenges, such as tax delinquencies or prior legal judgments, it’s best to disclose this information upfront. This allows underwriters to understand the situation, determine if it can be addressed or explained, and ensure the review process advances smoothly. Being transparent helps build a stronger working relationship and supports a smoother path to potential funding.
How Commercial Funding Inc. Treats Underwriting Differently
While traditional banks rely heavily on credit scores and stable financial history, our accounts receivable financing takes a different approach. We don’t rely on algorithms or rigid credit models. Instead, we take the time to understand your accounts receivable, your customers, and your business goals.
If something requires clarification, we’ll ask. If you're uncertain about a document, we’ll guide you through it. If you're coming from another lender, we’ll help you navigate the transition. What we look for is consistency, clarity, and willingness to communicate. A business that’s transparent makes it easier for us to create a financing solution that fits. Learn more about the solutions Commercial Funding Inc. can provide by filling out our contact form and receiving a free no-obligation consultation.
