These clients think that their clients will think, "Oh, you're factoring, you must be in a worse financial situation than we knew, so we'll renegotiate our terms." Also, they think that if they don't pay, the factor will do "hard" collections, and the client has a need to "protect" their clients.

These clients are being paranoid.....
There are still other ways to get it done, ABLs non-notification may be doable for as little as a $250,000 LOC. Direct factoring may be cheaper as far as cost to capital, but may be more more expensive depending on how leveraged the client wants to do, and may offer more liquidity than a conservative bank. Almost certainly a quicker underwriting.