Notification vs Non-Notification Factoring
Notification factoring is an arrangement in which the account debtor is formally told that its invoice has been assigned to a factor and instructed to pay the factor directly. In non-notification factoring, the debtor is not told and continues to pay the business, which then settles with the factor.
Why lenders choose one or the other
Notification gives the factor more control because payment comes straight to it, and is the norm in traditional factoring; the debtor receives a notice of assignment. Non-notification preserves the business's customer relationships and confidentiality but carries more risk because collections flow through the borrower first.
The servicing implications
Under non-notification, the lender reconciles against a ledger it does not collect on and must watch for diverted funds, making timely payment reconciliation essential. Zolvo automates verification, reconciliation, and monitoring under either model.