A business’s decision on the factoring company to use is one of the most important decisions they will have to make. Even though it is not the same as a board meeting on the next expansion plan or next new service to offer. But the factoring company you work with can determine how pleasant and profitable your experience will be.
First you need to understand the importance of a factoring company, only then can you know how crucial it is to choose a reliable one. Every Company has different components that require specialists to handle them. Unfortunately, in most cases company managers tend to cover numerous responsibilities due to limited staff.
It is vital for a company to recognize their limitations and delegate management tasks. A perfect example will be to hire an accounts receivable financing company as a means to reduce workload and optimize your business’s financial resources. There are also factoring companies for brokers and factoring companies for staffing agencies.
This article is the perfect guide to helping you identify top rated factory companies that are reliable. Here is a list of things to consider when deciding the company to choose.
What to consider when choosing the best factoring companies
How Long the Company Has been around for
The worst mistake you can make when trying to get financing for your business is to partner with a fly-by-night operation that does not have staying power. What you want is an invoice factoring company that has been in the business for a while and has more experience and references to prove its worth.
How stable the invoice financing company you choose to work with will determine how well it will help your company grow. It will help to work with a company that is reliable and has a good track record in the finance industry. Knowing that your partner is a stable invoice financing company provides you with the assurance that your company will be in good hands.
One way to identify a reliable factor company is when they are affiliated with the International Factoring Association (IFA). There is a wide list of factoring companies under this association and members of the association adhere strictly to stringent policies, practices and business ethics.
Caps on How Much You Can Finance
Some companies have concentration caps on how much a customer can finance. It is possible that your company never obtains above any of these caps, but if you do, capped factoring can withhold the capital you need. Therefore, it is best that you opt for a factoring partner that does not cap their services.
Recourse or Non-Recourse Factoring
Factoring is of two types, recourse and non-recourse. Recourse factoring is the most common one. It is the type that ensures for any invoices that can not be collected by your factoring company to be returned by the customer. Non-recourse factoring on the other hand ensures that the factoring partner takes on some or all of this risk.
How much it Cost
Yes, there is a charge for factoring, but that does not mean it has to be expensive. It is very important that you consider the rate the provider charges. A quality or service issue may lurk behind the surface if a factoring company offers cut-rate terms. And if the charges from an invoice factoring company are over the roof, you may be overpaying.
Confirm to ensure that the customer service and contract terms tally with the factoring rates you have been given to be sure that you are getting a good deal.
The Time it Takes to Receive Funding
You get to realize how money and time really relate when you are having issues with your cash flow. The faster you can receive funding, the better off you’ll be. Aim to partner with a factoring company that can provide funds within day not weeks, preferably within 24 hours after the approval process is complete.
This deposit speed plays a major part in protecting your business’s revenue stream and ensuring you have the capital you need to complete projects and grow. Finding an invoice financing company that offers 24-hour pay may not be easy and some even charge additional fees for faster payment terms. It is best that you take your time to find one that does. This characteristic is part of what makes Factoring Express amongst the best factoring companies in Florida.
The Terms for The Factoring Agreement
The factoring rate is not the only thing to look out for. A good rate and a disadvantageous term is not a good deal. Having the right terms such as advances rates, the type of factoring, contract length, cancellation fee, and repayment schedules can turn a good financial decision into a great one.
Take your time to go over the entire agreement, not just the rate you will be charged.
Experienced Sales Team
Working with a factoring company that has lots of experience in treating customers and their debtors with expertise, confidence and professionalism will greatly help you. It is the best way to have a positive, excellent factoring relationship.
Additional Products Offered
There are a lot of factoring companies that offer various additional products such as small business loans, accounts receivable factoring and inventory borrowing. You never know what you might need, so opting for these companies can be really beneficial. You know you made a good choice when you have a partner that offers multiple financial solutions. The best factoring companies offer additional products.
Ease of Use Online Web Portals
You do not want to make the mistake of working with a factoring company that has a clunky web portal or app, especially not in this digital age. A poorly designed and hard-to-use web portal is a struggle you don’t want to experience.
Aim for an online presence that is simple to use and easy to access and navigate.
The Terms for The Factoring Agreement
The factoring rate is not the only thing to look out for. A good rate and a disadvantageous term is not a good deal. Having the right terms such as advances rates, the type of factoring, contract length, cancellation fee, and repayment schedules can turn a good financial decision into a great one.
Take your time to go over the entire agreement, not just the rate you will be charged.
Hidden Fees and Factoring Costs
Many Miami factoring companies have hidden fees and It would be best to avoid them. A factoring company that hides its fees lacks transparency and can be bad for business. An honest partner will save you from a lot of issues in the future. Hidden payment terms and costs during a factoring process is totally unacceptable.
Other Factors to Consider when choosing a reliable factoring company
Along with the above listed common considerations, there are also other factors to keep in mind when choosing a reliable factoring company:
- Types of invoices the business factors: There are different types of invoices and certain factoring companies do not accept specific types. For example they may not deal with invoices for advance payment or deposits may not be included. Invoices for annual support fees or subscriptions may also be a source of contention. So that you can know what you are getting into, it is important to know the nature of bills the factoring company deals with.
- Minimum value: A minimum monthly or quarterly total face value of factoring invoices is specified in some factoring agreements. In the event that you don’t meet the minimum, you might be assessed a premium as compensation. Some provide contracts with “no-minimum” requirements that are exempt from these restrictions. Like all other variables, it’s common to be able to customize the minimum value. A deal that has a low or no minimum could be slightly more expensive.
- The percentage of Advance: The factoring company will advance you a percentage of each sales invoice. The balance is paid by the customer when the invoice is paid. This advance ranges from 70% to 95%, depending on the industry and the business history. Some factoring companies are more generous with their payouts than others. It is best to opt for a factoring company that gives a good percentage of advance.
- Fund Distribution: This category includes two important topics. How long does it take to open an account and receive the first sales invoice financing tranche, to start? The timing of your compensation is your second worry. The majority of factoring firms will open an account and pay off any debts in two to seven days. Additionally, you can expect new finance invoice advances within 1 to 2 days.
- Check Company Reviews: A factoring company that has stayed for long in the market will have reviews. Going through the company’s client reviews can give you a better idea of the company.
As a business owner you can not undermine the benefits and importance of a factoring company. A factoring company will help in several ways including.
- Ensuring as seamless funding process
- Ensuring a robust internal financing system
However, only a good factoring company can guarantee all of its benefits. Be on the lookout for certain qualities such as stability, flexibility and professionalism when choosing a factoring company to partner with. Factoring Express is among the top 10 factoring companies in the USA, so you can be certain you are in good hands.
