Whether you’re looking for a financial solution to help you manage your cash flow, increase your working capital, or simply reduce the stress of your accounts receivables processes, choosing the right factoring company goes a long way in the overall success of the arrangement.
Here are a few points to consider when choosing a factoring company.
Experience and Expertise
If you find a factoring company with industry-specific experience, you know that they understand exactly how your industry works, what trends to look out for, and how to handle your clients. Plus, they will have the expertise and resources necessary to develop value-added solutions that could benefit your company.
Customer Service
Exceptional customer service is one of the most significant things that differentiate good factors from bad ones. Look at how responsive they are to your questions, how they handle your communications, and how quickly they answer you and pay out your advances. This will benefit your business and give you a good idea of how the factoring company will handle interactions with your clients, which is essential in maintaining good customer relationships. Well-established factoring companies often provide their clients with a single point of contact and a dedicated account manager trained to help you in the best way possible.
Flexibility
Can their services be adapted to meet the unique needs of your business and industry? Is there a minimum volume of invoices, or can you submit as many or as few as you choose? Are you required to factor all your invoices, or can you pick and choose which ones you want to factor?
Cost
Factoring rates and fees will differ from one factor to the next. Getting a few quotes and comparing the best options is good practice.
Terms of Your Agreement
Reading your factoring agreement thoroughly is one of the most important steps in finding the right factor. You need to be sure there aren’t any hidden fees or disadvantageous terms that could turn your good financial decision into a bad one.
Payment Terms
Check the payment terms offered by each company, including the time it takes to receive payment after invoicing and any penalties for late payment.
Credit and Risk Assessment
Consider the credit and risk assessment process of each factoring company. Make sure you understand the criteria used to evaluate your invoices and customers.
