After they receive your written notice to terminate - either 90 Days or Early Termination - your current factor will probably be interested in finding out why you want to leave. Possibly, they may try to negotiate new terms with you or meet any needs that weren't previously being met. Assuming they fail, they will begin calculating the buyout figure.
You may have to provide the current factor with a letter authorizing them to release details about your account (i.e. aging reports) to the new factor. With a fresh accounts receivable aging report in their hands, the new factor will begin verifying all the open invoices on your account. Typically, this is done by physically calling the accounts payable department for each of your customers to check each and every invoice. Along with this, they will also contact the buyers, brokers, claims departments, etc. This will help verify that there is no fraud or history/ongoing issues with claims and your business.
I have worked through many buyouts on both sides of the business and can tell you that it is extremely important for the above steps to be taken by the new factor. I once had a factoring company request an aging report that had at least 30 different debtors (your customers) and 5 to 10 open invoices each. By the next morning, they were already wiring us the buyout money. Over the year that followed, I was constantly being contacted by my old client, the new factor, and the customers, who were all so confused about who to pay, where did check number such-and-such go, and how come I didn't get any reserve after the buyout?
Be sure to follow up with the new factor to be sure they are doing their DUE DILIGENCE. In the next post, we'll explain just where this buyout money comes from and just how much you should pay in early termination fees.