How to Spot the Best Factoring Company for Your Business?

Many businesses these days have already recognized the many benefits of factoring and other forms of alternative financing. This funding method involves having a factoring company advance about 80 percent of the value of your accounts receivable instead of having you wait for 30 or more days for the customer to pay you in full. The money you receive can immediately be used for operational expenses such as payroll, overhead, and supplier fees. But it all hinges on whether you get the best factoring company for your business.

There are several ways to determine whether a factoring company is better than another. All things being equal, the factoring company that offers the lowest service fees is obviously better than another lender that charges higher fees. But not every company offers the same kind of service.

The Factor Should Understand Your Industry

This is one of the more crucial considerations you need to remember, but unfortunately a lot of factoring clients don’t realize its importance. First of all, you need a factoring company with experience, because you don’t want a factoring company that’s still feeling its way around.

This experience should also be in your industry, because the factoring needs of a trucking company is very different from the needs of a medical clinic. A trucking company may enjoy perks such as fuel advances, while a medical clinic needs a factor who knows the ins and outs of collecting from health insurance providers.

When you have an experienced factor, you may even enjoy benefits that you never expected. To check whether your factor has experience in the type of factoring you need, you should ask the factor for references in your industry.

You Can Get a Customized Service Package

The service of a factor goes beyond offering a large advance percentage for little costs. But the service package is not just about the fees. The terms must also suit your needs. For example, getting a 90% advance on your invoices may seem better, but it may not matter when 80% of the invoice value is enough for your needs. The higher advance may come with higher fees.

Collecting the fees is also usually the responsibility of the factor, but in some cases your customer may want to pay you directly instead of paying a company they don’t know. Some factors realize this and can make the necessary adjustments to their procedures.

Other businesses simply do not want to deal with invoices altogether, so some factors take care of each invoice instead. This can save a business from having to setup a separate department to oversee this particular function. This saves you money too.

They Have the Financial Resources You Need

Simply put, your factoring company should be able to handle the invoices you submit for factoring. For example, they may be able to handle invoices averaging $50,000 and totaling $500,000 a month right now. But if your company grows and your business begins to earn millions of dollars a month, then the best factoring company should still be able to accommodate your “growing” 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 www.neebocapital.com

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