As the year steadily marches on, many small businesses are beginning to realize that factoring may be a much better source of financing than bank loans. This development has been going on for years, and now a lot of factoring companies are eager to offer their services to small and medium sized businesses. Determining the 2014 best local factoring company can take some time, but you can accelerate the process by looking for these features:
1. A speedy application process with clear-cut instructions. A lot of companies use factoring companies because they can get the loan much more quickly than applying from a bank. Some factoring companies may be able to grant the financing in two weeks, but there are also others that will approve your request in a matter of days.
2. The best rates. Factors offer financing by immediately giving a percentage of the value of the accounts receivables so that the business doesn’t have to wait 60 or 90 days for the payment to arrive. Some factoring companies may advance 75% of the value of the accounts receivable, but others may advance 90% or even more. The 2014 best local factoring company would not only be able to advance a larger percentage, but will also charge the lowest rate on the remaining value of the accounts receivables. In addition, all their fees should be spelled out clearly in the factoring agreement, so that the client won’t be surprised with additional fees.
3. The best collection handlers. Some companies use factoring companies not as a way to increase cash flow, but simply because of the convenience afforded by the factor since they are the ones who will collect on your client. So in effect, you save money because you no longer have to hire people to collect the money from your client. But this can backfire if the factoring company’s collection methods run counter to the style of your business. For example, rude ways of collecting payments may only serve to worsen the relationship between the business and the customers. The best factoring companies, on the other hand, have perfected the ways of efficiently collecting from customers. The best examples of these are the experienced factoring companies who specialize in medical factoring. These factors know how to deal with Medicaid and private insurance carriers, and they know precisely what types of documents are needed to collect the payment.
4. Accurate risk assessment. Reputable factoring companies also excel in in assessing the credit risk of your company’s clients. They may also offer to do a credit rating review on your new customers. The best factors may even offer this service at no additional charge. By getting this information, you may be able to identify which customers deserve credit, and which ones are to be avoided.
Factoring can be a great asset to your business in many ways. But in the end, the right factoring company must first be chosen.