Do you want to break free from your clients’ long payment cycles? A factoring company can be the partner you’re looking for – they can help boost your cash flow by turning unpaid invoices into instant cash in as little as 24 hours. Still, not all factoring companies in Los Angeles are a perfect fit for your business, and choosing the right one will make all the difference.
For this post, we discussed the main aspects you should consider when browsing through Los Angeles factoring companies. We’ve also listed some of the most important questions you should ask to ensure that your business will get the best funding it deserves!
What to consider when choosing a factoring company in Los Angeles
If you’re planning to partner with a factoring company in Los Angeles, make sure that you inquire about the following first:
1. Check their industry experience
The first thing you have to check is whether the factoring company specializes or works with your industry. This is to ensure that they can meet all compliance and regulations concerning your business.
For example, factoring companies like Factoring Express is a trusted factoring trucking company in Los Angeles. Aside from that, we also specialize in healthcare, staffing, manufacturing, and contracting sectors. This means that we understand the business model and unique needs of these industries, which allows us to provide them with low-risk and flexible capital.
After all, you wouldn’t want to partner with a factoring company that has no knowledge about how your business works. This can lead to more problems and potential legal issues for your business in the long run.
2. Choose between recourse and non-recourse
The best factoring companies Los Angeles has on its turf offer either recourse or non-recourse factoring (or both!). Both of these factoring types provide excellent funding for your unpaid invoices but with different levels of liability.
With recourse factoring, you’ll enjoy lower rates and faster funding, but with a catch. If your client fails to settle the outstanding invoice, you’d have to pay the advanced cash back to the factoring company.
However, on the upside, factoring companies provide free credit checks on your clients before funding your invoice. This way, they can see whether the client has a good payment history or not. From there, you can decide whether it’s wise to factor the invoice or not under a recourse agreement.
On the other hand, non-recourse factoring clears you from most of the liabilities, even if your client fails to pay the factored invoice. Take note that non-recourse factoring isn’t absolute, and factoring companies in Los Angeles, CA, will have specific stipulations about the specific responsibilities you still need to fulfill.
Also, take note that although non-recourse factoring offers better security, it also comes with higher fees. Aside from that, there are more stringent requirements for your invoice to qualify for this kind of factoring.
3. Check the contract length
If you are already eyeing a Los Angeles factoring company to partner with, the next thing you should do is read the fine print thoroughly.
The factoring agreement contains all the specific terms of your partnership. This includes the contract length, which is something many businesses often overlook when hiring a factoring company for the first time.
Flexible companies like Factoring Express don’t impose long-term contracts. This means you’re free to go whenever you no longer need our service. Also, this will give you peace of mind since your business won’t be tied to any contract or long-term obligations with us should you decide to shift to a different funding option.
With that said, choose a factoring company with a short-term and renewable contract if you’re still testing the waters. Overall, you should steer clear of companies that require multi-year contracts unless you’re willing to assume that risk.
4. Know their termination clause
You should also inquire about the termination clause of the Los Angeles factoring companies on your shortlist. Some factors will impose penalties or early termination fees when you decide to leave earlier than what your contract states.
The good news is that there are providers like us at Factoring Express that don’t impose termination fees. We don’t charge setup fees either, and you can cancel our service anytime you like – no sweat!
Overall, if the factoring company will charge you hefty fines for account termination, you should consider looking elsewhere. Or better yet, you can call us directly at Factoring Express, and let’s talk about how we can help improve your business’s cash flow!
5. Ask about their pricing model
Most importantly, you should ask about the factoring company’s pricing model. This way, you can assess whether the company’s fees are cost-effective and within your business’ means.
Overall, factoring companies in LA have two types of pricing structures: variable pricing or a flat rate.
With variable pricing, the factoring company will charge you a small percentage of your invoice, usually around 1% to 3%, for as long as the invoice is unpaid. That means you’ll pay more the longer your client takes to settle their outstanding balance.
On the other hand, you can also find factoring companies that offer a flat rate. It’s a one-time fee that will be deducted from your invoice amount and it will not change no matter how long it takes for your customer to pay.
However, flat rate factoring fees are often much higher than variable pricing if your client will pay at the same timeframe. Some factoring companies will charge up to 4% for flat-rate pricing. But if your client is notorious for long payment cycles, this might be a more cost-efficient option.
7 questions to ask factoring companies in Los Angeles
Aside from the main points above, make sure that you also ask the following questions before you sign up with a specific factoring company:
1. What is your advance rate?
You should ask the advance rate percentage the factoring company can offer. Top factors in LA can advance up to 97% of your invoice value, which is a great option if you want to receive as much funds as possible in every accounts receivable.
Aside from that, this will give you an idea of how much capital the factoring company has. For example, here at Factoring Express, we can provide funding for up to $100 million, so you’ll have a steady and predictable cash flow.
2. What’s your factoring limit?
Make sure you also inquire about the factoring limit of the company as a whole and on a per-client basis. This way, you can assess whether the factor is a good fit for the invoice sizes you often handle.
Overall, a higher limit is a good sign that the company has solid capital. Also, this means that they can keep up with your funding needs as your business grows and accepts more clients.
3. What’s your process for handling collections?
You should also take the time to ask how the factoring company will handle the collections process. The best ones have an in-house collections team while others outsource it to a third-party provider.
Overall, you’d want to make sure that they have a professional approach so you can maintain a good relationship with your clients. If the factoring company can’t give you a definite explanation of their collections process, it’s best to look elsewhere.
4. What’s your policy on invoice disputes?
In rare cases when clients won’t pay, it helps to know how the factoring company will handle the dispute. This includes recourse and non-recourse terms together with stipulations that indicate your financial liabilities.
This way, you can also plan if there’s a case of non-payment. It will save your business from expensive surprises and the threat of bad debts.
5. Aside from factoring, what other services do you offer?
Top-rated factoring companies not only offer funding but also a full suite of financial solutions. This will help you streamline your business finances even more.
For example, as a factoring for trucking company in Los Angeles, we also provide dispatch services, fuel advances, fuel cards, and accounting for truckers. This means that owner-operators and fleet managers will have an easier time managing their expenses and funds with just one provider – us!
Why Factoring Express is the trusted choice in LA
If you’re looking for a trusted factoring company to partner with, Factoring Express can be the one you’re looking for in Los Angeles. We provide comprehensive factoring services that meet your business needs.
With us, you’ll enjoy instant cash advances as fast as 24 hours. Also, we don’t impose long-term contracts, minimums, or termination fees. You can choose the invoice you want to factor in whenever you need to. What we offer is guaranteed flexibility so your business can turn invoices into cash as fast as possible.
If you want to know more about our factoring service, contact us to talk to one of our specialists. You can also claim your 1-week free trial today – no obligation, cancel anytime!
