Accounts receivables factoring, or invoice discounting as it is known in some places, is necessary for any new or growing business. It provides the needed capital for initiating production and it is a much safer and cheaper option than taking out a business loan. However it can be quite difficult to choose the proper factoring company since many of them offer different terms and fees. Here’s a list of things you will want to look into before striking a deal with any factoring business.
Read Customer Reviews
This is the first thing any business should do before they turn to a company for accounts receivable factoring. There are many websites that have unbiased reviews concerning factoring companies and you can even find video reviews on Youtube. When looking through reviews, the most critical aspect is to go through the factoring company’s credibility and customer service. Do they charge hidden fees? Was the process as quick and easy as advertised? How smooth was the communication between the company and their clients? Many reviewers are quite candid and blunt in their reviews so you’ll immediately get a good idea whether or not that specific factoring business can be relied on or not.
Check Their Experience in Your Industry
Most factoring businesses are also knowledgeable in some industries while others are flexible to handle several more. This is important to take note of because some industries have different financial structures. The way they pay clients and the way they handle open invoices could be different. If the factoring company you are considering does not have experience in your industry you might want to look elsewhere.
Shop Around for Quotes
Just because you found one factoring company that offers a good deal it doesn’t mean you can call it a day. Shop around and compare quotes. Sometimes they will lure you in with low fees but then get back at you with penalty fees, especially if your client goes bad and does not fulfill the open invoice.
Check Their Collection Procedures
This is very crucial because it can determine how well your relationship with other clients will evolve. Some factoring companies do not interact with your customers and allow you to collect the amount and then close the invoice. Others will openly interact with your customers and close the invoice on their own. Some businesses relate with their customers better if their debt collection and financial assessments with factoring companies is discrete. It is entirely up to you to decide which collection procedure is best and it is wise to know beforehand which type your factoring company of choice utilizes.
With these tips in mind you’ll be able to find the very best factoring company to handle all your invoice discounting needs. Yes, there are fraudulent companies out there and there are some that require more than others, but these elements will help you sort out the good from the bad. Accounts receivable factoring is inevitable for many businesses and doing business with a good factoring company is key to your success.