Questions To Ask Invoice Factoring Companies

by | Apr 7, 2017 | Financial Services

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Making the decision to use a factoring service is a wise choice for any type of business from staffing agencies to technology companies and trucking businesses. The ability to have funding in hand based on accounts receivable sold to a factor for a fee gives small to mid-sized businesses a degree of freedom that is simply not possible through small business or bank loans and lines of credit.

If you are using invoice factoring companies, it is critical to understand that they are not all the same, just as not all banks or other financial institutes are the same. Doing your research to find the best of the invoice factoring companies that offer the most competitive rates, customer support, and transparency in their services, is well worth the small amount of time it takes.

Does the Factor Understand Your Business?

While factoring itself is the same across all industries, factors often have one or more industries where they specialize. This allows the factor to understand the business model and to also understand the various companies in the industry, allowing for better rates and more customized services on offer.

All Accounts Receivable or Just Those Required?

Some invoice factoring companies may require the business sell all invoices while others allow for the business to choose which invoices to factor. Additionally, some factors have a minimum volume requirement, which means that the business will be penalized if you do not factor those minimum volumes per week, month or quarter.

Contract Duration

Entering into a long-term contract with a factor can be very restricting for business. The top factoring companies do not require a long-term contract and will also not charge a customer for terminating their use of the factor.

Long term contracts typically come with the minimum volume requirements and hefty termination fees or low volume penalties, adding substantially to the cost of the service whether a business chooses to stay with the factor or end the service relationship.

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