Factoring has become a very popular way of getting funding among small businesses these days. It offers a lot of benefits, but of course, it still depends on which factoring company you do business with. The best factoring companies are actually very easy to identify. Take a look:
- Online application. One of the advantages of factoring as a source of funding is that you don’t have to go all over town to secure the financing you need. This is what you usually do when you’re shopping for a bank loan. With factoring, many factors allow you to apply online sometimes through a broker so you can apply to several factors in the comfort of your own home.
- Fast approval. This is another advantage you can get when you work with the best factoring companies. Banks can take weeks or even months to determine if you qualify for a loan or not. But factors may usually only take a week to see if you qualify for factoring. For the best ones, it may even take 48 or even just 24 hours to know if you qualify. This helps you to quickly identify which factoring companies are willing to help you out.
- Sufficient advance rate. In factoring, you get a percentage of the value of your invoice right away instead of waiting 30 days for the customer to pay in full. For most factors, the percentage of the value is about 75 to 80 percent. But if that’s not sufficient, some factoring companies may offer as much as 90% or more if your customer has a stellar credit history. If the invoice is worth $100,000 then it’s the difference between getting $75,000 and getting $90,000 right away. For some companies, the $15,000 difference can be a deal breaker.
- Competitive fees. Some companies charge very little fees. For example, they may not even charge any application or startup fees. Some factors on the other hand may charge for application and for startup, and they may even charge you when you terminate the factoring agreement.
- No long term contract. Some factoring companies may require you to make use of their factoring services for more than 2 years, which can be a costly process especially when you only have a short term problem that can be solved by factoring for a few months. But the best factoring companies may only require you to make use of factoring for the time period you need.
- Easily accessible. Factors are usually in charge of collecting the payment from your customers. The best factors post the information online (through a private, secure account), so you will know when an invoice is due or when a customer has paid in full. Other factors may even send the info through other means, so you can email, or phone them for the info if you want.
There are other considerations when you’re shopping for the best factoring companies to transact with, but in general they all offer useful benefits at very low costs.