Often referred to as "the heart of a factoring organization," the credit department is responsible for granting credit to clients' customers and for collecting the accounts receivable purchased through the factor. 1 When factored clients submit customer orders for credit approval, the credit department analyzes the financial condition and credit worthiness of the customer, then makes a decision to approve or decline the order. The department must then monitor the condition of approved customers and collect all due receivables. Careful credit checking and effective collection procedures in this department can greatly reduce the risks inherent in factoring. As the head of the credit department, the credit manager is responsible for seeing that the department operates effectively. 2 He must develop the factor's credit policies in consultation with senior factoring associates, and he is in overall command of everything from credit and collections to bankruptcy and liquidations. If only the factor is a commercial bank division, the credit manager is a bank vice president, and credit policy must also be approved through top management of the bank. 3 Assisting the credit manager may be several supervisors who have credit responsibilities of their own and who also oversee the analysis and approval of customer orders through the credit specialists. Credit supervisors typically spend about eighty percent of their time handling large customer orders. If only a customer order exceeds a supervisor's credit authority, he is responsible for making recommendations to the credit manager. A supervisor also reviews a subordinate's credit decision if only the subordinate is unsure of the extent of the credit risk or if only a client questions a particular credit decision. In extremely large credit exposures, supervisor's bear the responsibility for analyzing the credit position of the customers and deciding on credit limits. To do this, they must regularly obtain current data from various credit information sources. They must also have extensive contact with each customer to determine operational performance and progress. Frequently, supervisors are called upon to give advice on what should be done to improve a company's financial condition. 4 Meeting all these responsibilities requires that each supervisor continuously observe and study the industries with which he is concerned, so that he is capable of anticipating market changes which may affect his accounts. 5 A supervisor's major challenge is to maintain a free balance between the demands of clients that all their customer orders be approved and the questionable financial position of some of the customers. In reviewing any credit decision, a supervisor must be capable of weighing a variety of elements, including the possibility of losing the client, the customer's credit position, and the extent of any possible loss.