Once your company has decided to use a factoring company for accounts receivable financing, you really need to choose the right one. Making the wrong decision can have disastrous consequences for your company, and this can, not only negatively affect your current profit margins, but also cause some ripples in your company’s future transactions.
Here are some tangible hallmarks you should be looking for in factoring companies:
The best way to find information about a factoring company is to collect information from its previous and current clients. This should be more objective than the information provided by the people working for the factoring company.
The information you need to gather from the references should include the following:
- The simplicity and ease (or lack thereof) of the application process, and the time it takes for the factoring company to approve the funding request;
- The quality of support received from the factoring company;
- The time period from the initial approval of the funding request to receiving the initial funding and the time required before the company received the remaining balance of the advance;
- The reaction (complaints and comments) of the company’s customers regarding the factoring company;
- Their willingness to use the services of the factoring company in the future.
For the best service, the factoring company should offer many kinds of support for their clients, such as telephone and email support, and face to face meetings. A factoring company that offers only email support may not be as supportive as those companies which offer many other avenues of communication. By offering several modes of communication, your company has a better chance of having its questions answered promptly, which can prevent or minimize the possibility of misunderstandings later on.
Factoring Company History
The length of time that a factoring company has been in the industry is also a very telling indication whether it is reputable or not. That a factoring company has stood for many years says that it has provided sound services for its clients, which is why it has very little difficulties in finding new clients. It is also vital that the factoring company should have a long history of providing their services to companies in your industry.
Although it is entirely possible that a newer factoring company can provide the same quality of service for your business, your company takes on more of a risk with a factoring company that has a much shorter history of service in the industry.
Of course, there are also intangible signs you may wish to look for, such as the personality and professionalism of the factoring company. After all, it is your company’s reputation at risk, and if you select a factoring company which deals rudely with your company’s customers then you may lose some customers.
You may even tarnish your company’s reputation and lose potential customers when word of the factoring company’s rudeness spreads, which is why it is crucial that you choose wisely among the many factoring companies offering their services.