Notice of Assignment in Factoring

The Importance of a Notice of Assignment in Factoring

Last Modified : Jun 26, 2024

Fact-checked by: Bruce Sayer

In a factoring arrangement, a Notice of Assignment (NOA) is the factoring company’s first communication with the client company’s customers. It is the starting point of an ongoing relationship between the factoring company and the account debtors.

Invoice factoring is a mainstream alternative financial strategy used by small and medium-sized companies to speed up cash flow and gain immediate access to working capital. This common practice provides the accounts receivable (A/R) financing needed to support operations and fund growth. By partnering with an invoice factoring company, a business (the factoring client) sells their accounts receivable invoices at a discount in exchange for immediate cash and transfers the right to collect amounts due to the factoring company. This mutually beneficial relationship involves a third party – the factoring client’s customers (debtors). An essential step in this partnership is to inform the debtors that the accounts receivable have been “assigned” and future payment should be made payable to the factoring company. This communication is done by means of issuing a Notice of Assignment.

What is a Notice of Assignment (NOA)?

The notice of assignment or NOA is a simple letter that the factoring company sends to the debtors. It is used to inform them that the financial rights to invoices issued by the original lender (the factoring client) are sold to and adapted by the factoring company. There are four significant elements of this notice:

  • The Notice of Assignment lets the debtor know that the factoring company will be managing the invoice.
  • The document contains the essential notice that the factoring company is now the agency with the right to the payment.
  • The Notice of Assignment includes all new payment information, including bank details and full instructions on fulfilling the payment.
  • The letter documents other pertinent legal matters relevant to the assignment.

This notice is the first means of communication between the factoring company and the debtors. It is a crucial document to ensure that every party in a factoring transaction is fully informed of their responsibilities and asserts the factoring company’s right to payment.

How Does NOA Impact the Business?

Often, business owners who consider factoring are concerned about their customers’ perception. They are apprehensive thinking this type of funding may signal that the business has financial troubles. This concern is not warranted. In fact, it is a sign of sound financial planning at a time when banks are imposing harsh lending criteria and restricting credit to small and medium-sized businesses. Invoice factoring is common practice and well understood by accounting departments and personnel in most businesses.

In many cases, debtors are more than happy to deal with the efficient work practices and integration of accounting systems when working with a factoring company. Collaborating with a factoring company’s professional accounts receivable team provides several benefits to debtors, including:

  1. Streamlined accounts payable process

    Many debtor companies will already have involvement working with factoring companies. They understand that a factoring company has years of experience in working with companies for collections and recognize their expertise in managing accounts payable/receivable processes. This professionalism and knowledge of the invoice process makes accounts payable easier for debtors.

  1. Debtors understand that companies use invoice factoring to support growth, and growth is good

    In general, debtors understand the financial benefits of invoice factoring and will perceive it as a sound financial strategy to improve cash flow. Undoubtedly, they would rather work with a financially healthy business than one struggling to manage day-to-day cash flow.

  1. Nurturing customer service deepens relationships

    Invoice factoring companies understand the extreme importance of maintaining good relations between a business and its customers. Reputable factoring companies are dedicated to delivering the highest levels of expertise and service – not only to their clients, but also to client’s customers. Protecting and nurturing good relationships on behalf of clients is in both the factoring company’s and the client’s best interest.

The Factor/Debtor Relationship

Factoring companies work closely with a client’s customers and are very careful to manage these relationships with respect. This benefits the client as they are separated from the task of having to chase customers for payment. Instead, they can concentrate on serving the customer’s need and ensuring good service.

The factor should respond and provide reasonable proof of the assignment if questioned by the debtor. These initial communications can help to clarify the relationship between the client and the debtor, how and when payments will be made, and can provide the debtor a sense of trust with the factoring company. Should delayed payment become an issue, or if a dispute over an invoice occurs, the experienced professionals on a factoring company’s accounts receivable team are trained to manage the issue with efficiency and courtesy.

Working with a factoring company provides many benefits to improve cash flow and strengthen customer relationships. The Notice of Assignment is just the first step in creating positive synergy between a factoring company and the client’s customers.

For more information regarding invoice factoring and how it can support your company’s growth, visit


ABOUT eCapital

Since 2006, eCapital has been on a mission to change the way small to medium sized businesses access the funding they need to reach their goals. We know that to survive and thrive, businesses need financial flexibility to quickly respond to challenges and take advantage of opportunities, all in real time. Companies today need innovation guided by experience to unlock the potential of their assets to give better, faster access to the capital they require.

We’ve answered the call and have built a team of over 600 experts in asset evaluation, batch processing, customer support and fintech solutions. Together, we have created a funding model that features rapid approvals and processing, 24/7 access to funds and the freedom to use the money wherever and whenever it’s needed. This is the future of business funding, and it’s available today, at eCapital.

Oscar Rombola, Managing Director

Oscar brings over 22 years of experience and enthusiasm for alternative finance to his role as Managing Director. His deep understanding of the industry positions him as a leading consultant and a respected authority figure. Oscar's fluency in English, French, and Spanish allows him to connect with a diverse clientele and forge strong partnerships.

Oscar's dedication to the field is further evidenced by his extensive industry involvement. He served three consecutive terms on the International Factoring Association (IFA) USA advisory board and currently holds the prestigious position of President and Founder of the IFA Canadian Chapter. Oscar was asked to be part of the Advisory Factoring Committee at SFNet where he mentors and participates at Factoring Webinars as a moderator and participant.

Prior to his current role leading strategic relationship development for eCapital's Freight Factoring Division, Oscar held various executive positions at factoring and financial companies. He also co-founded ITC Invoice to Cash, Inc., where he served as Vice President of Business Development & Partner for over eight years. The company was acquired in 2013 by Accutrac Capital , now eCapital.

Oscar's academic background includes degrees from York University and Laval University, along with Financial Advisor designations from Canada and the US specializing in alternative finance and M&A.

More Great Reads