Are You Looking for a Local AR Factoring Company? Here’s What You Need to Know

You run a business but now you’re running out of working capital. Your suppliers need to be paid on delivery, your utility bills are due, and you are wondering where to get the money to pay your employees. Meanwhile, your customers only pay 90 days after you’ve delivered their order. How are you supposed to keep your business afloat for the next 90 days?

For most people, the most obvious answer is to go to a bank and ask for a loan. But banks today are no longer as cooperative. And even if they were, often the application process takes too long.

If you need the money immediately, your best option is to partner with a local AR factoring company. Applying for this kind of financing takes a short period of time and the approval rate is much higher. Setting it up takes only a week or two. You give them your accounts receivable, and in return you get about 80% of the value of the invoices right away. You get the rest when your customer has paid in full and the factoring company takes its cut.

The number of factoring companies is increasing, and this gives you a bit of leeway on your choices. But how do you select the right local AR factoring company for your needs? Here are some variables you need to look for:

  1. Experience. You need a factoring company with experience, especially if you yourself are new to this method of financing. You want a company which already knows the intricacies of this funding method, and you want someone to guide you through.
  2. Specialty. Even a factoring company which claims to be familiar with all types of industries will prefer one or two specific industries. You want a company which already knows the peculiar rules and customs of the niche you are in. If you are running a medical clinic, for example, you want a factoring company with extensive experience with insurance carriers.
  3. Size of client companies they usually work with. Factoring companies are more comfortable with small businesses, while others may prefer bigger corporations. You can confirm how the factoring company works by asking for references. Specifically, you want a reference which is the same size as your company and is also connected to your industry.
  4. What are the terms of the contract? How large is the advance? What is their limit? How much do they charge in terms of percentage, setup fees, and fees for late-paying customers? These are questions you need to ask before making a decision.

To avoid confusion, you may want to refrain from applying to a dozen different factoring companies. Instead, pick the top three among the bunch according to the variables listed here. You can then compare them against each other so that you can determine which one is the best for your needs.

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Chris Lanchech

Hi everyone, my name is Chris and I am a junior analyst at Neebo Capital and an inspiring blogger. We enjoy speaking with business owners and entrepreneurs who come to Neebo Capital looking for cash flow solutions. Give us a call toll free at 1-888-382-3766 or Visit us online at

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