How to Pick an Invoicing Factoring Company

Are you ready to taste financial freedom? With invoice factoring, you can receive cash quickly!

Invoice factoring is a form of financing that allows small and medium businesses to receive cash advances on their accounts receivables. It grants you the ability to provide an immediate solution to your cash flow needs and eliminates the usual 30-60 day waiting period for your outstanding invoices. 

As a business owner, you understand the frustration of late payment cycles. It can lead to serious cash flow constraints, causing business owners to fall behind on important expenses or force them to pass up opportunities to expand the business. 

Get a taste of financial freedom and get started with invoice factoring today. Choose the right invoice factoring company for your business. 

Here are some things you should consider before picking a factoring company: 

  1. How long has the Factoring Company Been in Business?
  2. What are the Terms and Rates or Fees of Factoring? 
  3. Does the Factoring Company offer Non-Recourse Funding?
  4. What is the Difference Between Invoice Factoring, Invoice Financing, A/R Factoring, and others? 
  5. How flexible is the Factoring Company? 
  6. Does the Factoring Company offer strong customer service? 

How long has the Factoring Company Been in Business?

One of the most critical aspects of finding the right factoring company is finding one that has experience with businesses like yours and has been in business for a long period of time. Although the process of factoring invoices is standard across the board, experience and time spent in a small business specific industry is a must. The more they understand an industry, the smarter and better funding deals can be made. They should be able to offer better funding packages, better rates, and lower your overall risks while improving the chances of success.  

What are the Terms and Rates or Fees of Factoring?

Not all factoring companies have the same terms or fee structure. Ask about the contract terms.  Factoring companies that claim to be the fastest, cheapest and easier to use might not be the best for your business. Some companies advertise very low fees but there is more to this than meets the eye. Always remember, what might seem to be the cheapest or best option can turn out to be the more expensive or restrictive option with additional fees or lower advance rates. 

Does the Factoring Company offer Non-Recourse Funding?

Non-recourse funding offers you a lower risk of not getting paid. In non-recourse funding, the factor accepts all risk of non-payment of a factored invoice, and the business owner has no risk. Less than 20% of factors offer non-recourse funding. The non-recourse factoring company must have a strong balance sheet and credit culture to qualify.  

What is the Difference Between Invoice Factoring, Invoice Financing, A/R Factoring, and others? 

There is a variety of funding options in the factoring industry. Many sound similar but can be very different. Whether it is accounts receivable financing or accounts receivable factoring, it is important to know the difference for a successful outcome. Educate yourself on the many terms used in the factoring industry before choosing your factoring company.   

How flexible is the Factoring Company? 

It is vital to choose a factoring company that offers flexibility. Some companies require long-term contracts, prepayment penalties and monthly minimums. We highly recommend choosing a factoring company that allows you to choose which invoices you want to factor. Avoid terms in which you must factor all invoices or factor all invoices from a customer. Additionally, some factors will take over your accounts, leaving them in charge of all invoices. While this may sound appealing, many small business owners prefer to maintain ownership over their customer relationship.

Does the Factoring Company offer strong customer service? 

Finding a factoring company with strong customer service is critical for a couple of reasons. First, customer service is important for you as the business owner. Second, customer service is important for your customers. The factoring company will be interacting with your customers; therefore, they should treat your customers like you would treat them. Before deciding whether a factoring company is right for you, check their customer reviews and ask for company referrals.  

If you have questions about invoice factoring, please do not hesitate to contact us at your earliest convenience.