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What to know when selecting a Factoring Company

09/15/2011

There are many variables besides just the “lowest” discount fee that will come into play when selecting the factoring company best suited to your company’s needs, below are important things you should look for when picking a factoring company:

You can find a few main characteristics you should search for before selecting the best factoring company for your business. A reliable factoring company will likely have a quality credit department, a professional collection staff, a long track record, financial strength, and current technologies for continuing to keep their customers up to date with real time information.

Unlike a bank or perhaps a finance company, factoring companies have a day-in, day-out relationships in relation to their clients, so picking the best factoring company comes down to who can you see your business aligned with?

Sometimes, the answer for this question will be the factoring company with the lowest discount fee and quite often it will be the factoring company that suits some other needs greater than the comapany with the lowest fee. Subsequently, figuring out the overall cost can prove challenging, so you will want to take into account more vital variables. Heres points to consider in order to pick the most suitable factoring company for you.


Does The Factoring Company Have an in-house Credit Department?
Any factoring company that's got a great credit department should be your pick if you're searching for a factoring company that can help you make cautious credit limits for your customers. A factoring company that doesn't have a fully staffed credit department is likely to not approve best suited credit limits and as a result, may open your small business to unsuitable levels of risk. On the other hand, a factoring company in which does not approve sufficient credit to have capacity for your needs could unnecessarily constrict your companies capability to grow.


Does The Factoring Company Have A Collection Department?
You might want to pick a factoring company with a fully-staffed collection department.
Why?
Because It might shock you to learn that the majority of factoring companies don’t have a collection department. For anyone who is considering finding a factoring company that takes its role of collecting receivables seriously, the factoring company will assign your business with two contacts: an account representative + a collection specialist. This is important because factoring companies WITHOUT a collection department are forced to assign the task of collections to one account representative.


Does the factoring company have a good track-record?
A trustworthy factoring company which has been operating more than 10 years most likely has the experience needed to deliver an quality level of service. A factoring company which has weathered numerous business cycles shows stamina.

However If in doubt, ask the factoring company you are talking to for bank recommendations or information about their financial shape. Even more importantly, ask your factoring company for client references ideally clientel in your own industry.


Does the factoring company have a specialist within your industry?
You might be looking for a factoring company that understands your industry. Industry specialists are really vital. For those who run a staffing company, you should seek out a factoring company with staffing specialists. For instance a staffing factoring company will undoubtedly be familiar with your regulations and payroll needs and provide unique services such as payroll checks, payroll deposits, payroll reporting, payroll software, invoicing and invoice mailing.

A staffing factoring company will certainly already have their own first hand knowledge in dealing with hundreds of other staffing companies. If a staffing factoring company already knows your customers, you will save money for the reason that you will not have to spend money on credit files.


Is the factoring company the best size for your business?
You might have an interest in a large or small factoring company, depending on your viewpoint. The best choice could be a factoring company that is someplace between small enough to provide customized service and access to top management, then again big enough to deliver financial stableness, the capability to support your needs, along with the ability to weather tough economic times.

A factoring company that will send a executive officer out to visit you may be the service your looking for. Sadly Very few factoring companies do so. If it is really important to find out whom you are dealing with, you should ask the factoring company whether they will send a officer from the company out to visit you. A big factoring company very likely will not be capable to visit your location, unless of courseyou are based down the street. Dont settle for a visit from a salesman associated with them. It's less likely the factoring company allows the salesman any real authority, so it is ideal to ask for a executive or manager to come in person.

A factoring company which is too small might not have the financial components to fulfill your needs. A factoring company which is not big enough may be too critical which of your customers they will approve for factoring and what amount. Small factoring companies in addition may not have the capital to buy all your receivables.


Does the factoring company use new technologies?
More and more customers are asking for factoring companies to generate them the best innovative reporting systems. You may want to steer clear of factoring companies which don't give access online to your factoring information. You may even look for a factoring company that allows you to acquire credit decisions online. A factoring company which uses new solutions will ultimately help you save money. One example is if you have to send invoices to your factoring company through over night courier odds are you're paying the tab. When your factoring company has the ability to accept digital copies by e-mail then your documents will be less pricey to send.


Yes low fees are great, but don’t get blinded by that the details count most. Here Are The Questions You Should Ask A Factoring Company:

  • 1. Does the factoring company have a credit department?


  • 2. Does the factoring company have a collection department?


  • 3. Does the factoring company have a good track-record?


  • 4. Does the factoring company have a specialist within your industry?


  • 5. Is the factoring company the best size for your company?


  • 6. Does the factoring company use new technologies?


If you feel that your business would benefit by setting up an account receivable factoring program.

Please contact us at 1-888-382-3766



Quick Link to Financial Resources:

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