Undisclosed factoring, also referred to as non-notification factoring, is specific in that the customer is not notified about the receivables being pre-financed by the factoring company.
In this form of factoring financing, there is not the usual requirement for customers notification about the assignment of the receivables to the factoring company and for customers consent with the assignment.
Undisclosed factoring is based on various legal and organizational procedures. One of the advantages is that the bank account to which the customer makes payments is, in formal terms, an account of the client, not an account of the factoring company.
Given the above, undisclosed factoring is a good option for customers who do not allow factoring or where it is not, for business reasons, advisable to inform the customer about the client using the services of a factoring company.
On the other hand, this form of factoring financing is only feasible for receivables from sufficiently strong and creditworthy customers, such as chain retailers or multi-national companies or in the automobile industry. Additionally, undisclosed factoring requires superior creditworthiness of the supplier – client of the factoring company.