Factoring can be a smart way to raise funds for a struggling business. Make a wise choice so that you do not risk losing your money and in the worst case scenario closing down of business.
Factors to consider when choosing a factoring company
Valid operational period.
When scouting for a factoring company, go for a leading factoring companies that have been in existence for a long period pf time. With this you are not at risk of any fraudulent repercussions. Do your research on the level of experience they have and go through their success stories.
Another way to know the validity of the factor firm is to look into their referrals. Those who have previously worked with them are best suited to give you the pros and cons.
Broker or not
Dig deep into the factoring company you need to work with to ensure it is not a broker or go between for you and the factoring companies. The main purpose of brokers is to attract more clientele for others. Most broker companies may lack enough funding to help you out.
Financial terms and conditions.
All factor companies have certain fees that you pay. This helps them in the process of debt collection and covering any liabilities that they may encounter through your clients.
This is a very important factor that should not be overlooked. Commendable leading factoring companies make their income through the discount it charges. Look out for hidden exorbitant fees for the transactions done. This can raise the rate of factoring.
Go through the contract you are given keenly and ask for any form of clarification if needed.
Tailored factoring.
There are factoring companies that work with specific industries. It would be a great advantage to be able to work with a firm that knows more about the specific product or service you are providing your clientele. All in all a good factoring firm should be able to work with any service providers
Selective factoring time period.
Some firms specify the capacity of invoices to be factored over a certain given period of time. There are client firms that may just be in need of factoring just some of their invoices. You need to go with a company that offers you this type of flexibility for convenience.
Factoring time
There are factoring companies that work for you for a given period of time; it could be a year or quarterly. In case you want to stop working with them before the given time has passed, you may get pay some penalties. The most common periods are monthly, quarterly or seasonal sales cycle.
Most people prefer to work on an open term contract that allows them to stop at any given time.
Credit range.
When you are looking for a factoring firm; first know what credit range they offer. Do you need a large amount of funding or just a sizable one? Choose a company that will cater for your specific needs.