Factoring offers a quicker way to fund your business, which is by using your accounts receivable instead of waiting for payments. A factoring company buys your business’ invoices at a discount, giving you the immediate cash flow you need.
If you want to bring the same convenience to your business, partnering with a reliable factoring company would be a smart choice. But then again, your choice of factor is a crucial aspect. With that said, we’ve outlined here the main considerations to help you find the right factoring company that suits your business needs.
A Factoring Company's Role in Your Business
Cash is king – this is probably the most prominent rule in every business. A liquid business means that it can easily cover any short-term liabilities like loans, wages, taxes, and expenses.
A business can use third-party factors to increase liquidity. Ideally, optimally managing receivables and liquidating them through factoring to support its financial responsibilities. And the best part here is that there are no interests! You read that right; unlike loans, factoring doesn’t charge you any interest.
Also, factoring companies in Miami, like Factoring Express, will advance up to 97% of your invoice’s amount and will later take care of the collection process. This instant cash conversion allows you to cover your expenses as fast as 24 hours.
Benefits of Factoring vs Traditional Bank Loans
If you haven’t worked or partnered with a factoring company before, you might be wondering what benefits factoring has over the traditional bank loan. In this section, we’ll list down all the advantages of factoring so you can get all the information you need before considering the service.
Unlike bank loans, factoring does not incur any interest.
This is clearly not a debt to be repaid. Since you will be selling your A/R at a discounted rate, fees are always upfront without hidden charges and interests. A one-time invoice factoring fee will be charged, and you won’t have to worry about making regular payments.
Get immediate funding.
The problem in getting a bank loan is whether you will be granted the loan or not. More frequently, business owners find themselves struggling to comply with all bank requirement documents just to have their loan application declined.
What’s worse is that loan application paperwork can be tedious to fill in, plus it takes weeks, months even, before they finally inform you of the decision. Unfortunately, bank decisions do not always turn out positive. There are times when you would wait for approvals only to find your application declined. We understand that those weeks of waiting in uncertainty could have been profitable for you as a business owner had you just gotten the funds.
Having a good credit score is not a requirement.
Before lending you a loan amount, banks would check your credit history and your current credit score. Your loan value will be dependent on this as well as the likelihood of getting your application approved.
The biggest downside here is you will still get evaluated. So, when you’re just recovering from a bad credit score or trying to build one yet, you will probably find how hard it is to get a loan approved. There is simply no guarantee that you will get the money your business needs.
Factoring Express, on the other hand, evaluates your customer’s credit score, not yours. What matters to us is that your customer has a good payment history. This also protects your business as prevention for recourse terms.
No upper limits.
Banks determine the loanable amount for you based on your credit score. That said, it predetermines a ceiling or a maximum amount you can borrow, depending on how much you can pay on a regular basis.
Choosing Factoring Express enables you to gain the upper hand in liquidating your invoices. You ultimately choose the invoices you want to sell whenever you want to sell them – giving you the power to convert your A/R into cash instantly. There is no minimum or maximum to this, as you have the option to choose which invoices to sell.
Key Factors in Choosing Factoring Companies in Miami, FL
If you’re based in Florida, you might be surprised to know that a lot of factoring companies are in Miami. Apart from beautiful beaches, Miami is a top choice for small to medium-sized businesses across different industries as it offers a favorable tax structure.
Compared to other major areas in the US, companies enjoy low sales taxes and low property taxes in Miami. No personal income taxes are imposed on both businesses and individuals at the state level. This said, businesses like factoring companies sprout left and right in the city. Now, we’ll take a look at key factors you should consider when choosing a factoring partner.
Industry Experience
Look for factoring companies in Miami, Florida, that have industry-specific experience in catering businesses like yours. Customer reviews, financial stability, and reputation are three main areas to look at.
Miami factoring companies specialize in one or more different industries. For instance, Factoring Express, over the years, has catered 6 major business industries such as transportation, health care, staffing, government vendors, merchandise, and contractors. Industry expertise is important because this will determine whether or not your factoring company of choice is aligned with your business.
Good Customer Service
It does not matter if you’re trying out factoring for the first time or have been an avid client; your questions are important. A good factoring company must have good customer service – one that is responsive and helpful. You don’t realize the significance of efficient customer service unless you get to experience it first-hand.
Customers like you have different needs, and we understand that. From dealing with challenges to managing our business relationships, our team is available anytime you need answers.
Reputation
Other business owners you know might have feedback on some factoring companies they’ve worked with. Getting their personal feedback and recommendations is also a great way to list down companies you should consider. Keep in mind that you’re here to narrow down and select the best option for your business.
No matter what business or industry you’re in, choosing a partner with a good reputation is essential. Apart from word of mouth, do your due diligence by researching a factoring company’s reputation. A company like Factoring Express, known for transparency and good reputation, is just about the right fit for you.
Consider Rates & Fees
Factors offer different levels of services, so understanding the cost is critical for a business owner like you. Generally speaking, rates depend on the total amount of invoices you will be selling. The more you factor in, the lower rate you’ll get charged.
When a factor purchases your invoice, the risk of collection is transferred to them. Instead of waiting 30, 60, or 90 days to collect these receivables, cash will be available to you almost instantly. These considerations go into the pricing of rates and fees.
We at Factoring Express offer a 1-week free trial for new clients. Should you wish to try this offer and look at our fee structure, don’t hesitate to call us.
Contract Terms
Different factoring companies have different flexibility. Some require long-term commitments, some require you to factor in all of your invoices, and some do not. While other factoring companies offer short-term contracts and allow you to choose which invoices to sell, ultimately understanding the contract terms you’re signing is important.
Read through the agreement carefully, making sure you pay attention to all important terms and details. Below is a list to review before signing a contract with your chosen factoring company.
- Sale/Purchase of Receivables.
- Credit Approval, Withdrawal, and Disputes.
- Invoicing Schedules.
- Payments and Advances.
- Obligations and Fees.
- Representation and Warranties.
- Termination and Remedies.
If as a business owner, you feel there is something wrong with any of these, feel free to contact your factoring partner to discuss terms. This contract should be favorable to both parties and going over the agreement ensures a smooth process in the deal.
Our customer support team at Factoring Express is ready to answer any questions you have – just reach out to us via chat, email, or phone.
Conclusion
The benefits of using factoring companies as a choice to get cash quickly are endless. Instead of relying on loans with blowing interest, factoring comes in as a better option. Still, entrepreneurs and business owners like you should carefully choose a partner that aligns with your industry and goals as a business.
We hope all the key factors we discussed in this article will serve as a guide for you in choosing the right partner for your business. Remember, Factoring Express is here to help your business with immediate funding solutions. Get in touch with us to learn more about our services.
