It takes common sense and research to find the right factoring company for your business needs. While this may consume some time, it pays off.
Ultimately, do not go for the first company you come across. Always go a step further evaluating the company against set criteria. Here are 7 things to look for when choosing a factor:
- Reputation – Although online reviews of companies offering factoring services are a good place to begin your search, you should not take them on the face value. Be sure to comb through the reviews for reviews that offer realistic insight into a factor.
While at it, you will do well to stay clear of those companies that do not respond to inquiries in a timely manner or are difficult to contact. You will do well to talk to a reputable factoring broker for an independent opinion. They may also recommend a company that suits your needs.
- Customer service – You can place calls to a number of factoring companies where you get a first-hand opportunity to gauge their helpfulness, transparency and attitude. It is no doubt that this will help you rate the companies as you review the notes.
- Factoring costs – When you lay down the situation of your company and costs to prospective companies, they will give you an estimate of their cost. This is usually based on the average outstanding invoice days expected, the amount you intend to factor in a month and the credit-worthiness.
Some companies may give you weekly, monthly or daily costs. Others may peg it on a flat rate, a one time fee regardless of the outstanding collection days. Generally, a flat rate is considered better especially where invoices are outstanding for more than 45 days. Monthly and weekly rates tend to be expensive.
- Industry – Finding a factoring company within your industry is a great move. This is because you can be sure of their expertise in your industry. Or would you want to have a dermatologist taking care of your dental accounts? Well, find a company that will give you the best based on experience.
- Fees – This is a major one. In fact, it is advisable to take into account the costs involved up front. Of great importance, look out for additional or hidden charges that may crop up at an advanced stage. While some companies may negotiate fees with you, others will not. Be sure to ask the company if they charge a monthly fee. Some companies may charge a fee if you do not meet a minimum invoice amount per month.
- Contract terms–All factoring companies usually have contract terms that address cancellation and termination fees. You must be careful with contracts that require long term contract or attract an exorbitant cancellation fees. Most companies require a 30-day cancellation notice.
Take note that the terms are not usually the same for all the companies. Thus, you can be able to negotiate terms according to the situation of your company. Do not hesitate to ask.
Overall, while there are many companies offering factoring services, you need to do your research well so that you settle on the best.