It’s easy to find a factoring company. However, finding a good factoring company takes a little effort.
Factoring companies come in various sizes and have various expertise. Some of them serve a broad range of industries while others specialize in just a few industries and still others only serve specific niches.
Here are five things to consider when searching for the right factoring service for your company:
Anything that involves fees has the potential for hidden fees, which, when talking about factoring, can include:
- advance fees,
- factoring fees,
- processing fees,
- ACH fees, and
- application fees.
Before you enter into any kind of agreement, make sure you know every single fee that you will be required to pay and get the end cost number up front. A good factoring company won’t have any hidden fees. They will tell you everything you will be required to pay without you having to ask first.
A hidden fee should be an obvious red flag.
Remember that factors don’t just deal with you. They also deal with your customers and clients. Because of this, you will want to make sure that a factoring company has courteous and professional customer service, so it reflects well on your company, too.
They should also have prompt telephone and email support and should be open to face-to-face meetings if necessary. Check customer reviews and ask for references before you enter into an agreement.
While some factoring companies will require you to enter into a year-long agreement, plenty of others will offer month-to-month agreements with no minimum volume requirements. You may even be able to find one that won’t make you sign any kind of agreement and will just let you sell the invoices you need to when you need to.
A good factoring company will allow you the flexibility you need without trying to lock you in long-term and requiring you to sell them invoices when it’s unnecessary.
A good factoring company for your business will have expertise in your industry and a proven track record of success. If a factoring company has no experience dealing with your industry, find a different one that does.
This one may be a bit more difficult to gauge when you are just getting started with a factoring company, but that’s where the customer reviews come into play. Once you have references from the factor, ask those references if the factor does what they say they will, how they treat their clients’ customers and how transparent the fees are. Also, talk to at least four or five different factoring companies to ascertain what a fair rate is that you should be paying.
By following these five guidelines, you will be able to easily find a good factoring company to work with.
[Photo courtesy of N ino on Flickr]