Choosing a factoring company is one of the most underrated decisions a business can make. Sure, it’s not as critical as expanding into a new market or rolling out a new service, but make no mistake: the factoring company you work with can make the difference between a pleasant and profitable experience - or a disappointing and costly one.
Below are 10 things to consider when you are looking for a trusted and capable factoring provider for your growing business.
#1 How Long the Company Has Been in Business
When you are trying to get critical financing for your business, nothing is worse than a fly-by-night operation that doesn’t have staying power. A factoring company that has been in business longer has more experience and references to prove their worth.
#2 Caps on How Much You Can Finance
Some companies have concentration caps on how much one customer can finance. Your business may not ever have to obtain more than any of these caps, but in the event that you do, capped factoring can deprive you of the capital you need. For that reason, we recommend finding a factoring partner that does not cap their services.
#3 Pricing: How Much It Costs
Factoring is not free, but that does not mean it has to be expensive, either. The rate the provider charges is a key determining factor. If there is a provider that is offering cut-rate terms, there may be a quality or service issue lurking beneath the surface. And if a provider is abnormally expensive, you may be overpaying.
Make sure the customer service and terms match the rates you have been giving to see if you’re getting a solid deal. Which leads us to...
#4 Terms of Contract
Signing a factoring contract that features a great rate but disadvantageous terms isn’t a good deal. Likewise, the right terms - such as repayment schedules, advance rates, the type of factoring, etc. - can turn a good financial decision into a great one.
Carefully consider the entire arrangement, not just the rate you will be charged.
$5 Recourse Vs. Non-Recourse Factoring
There are two types of factoring: recourse and non-recourse. Recourse factoring is what many customers choose. Under this option, any invoices that cannot be collected by your factoring company have to be bought back by the customer. In non-recourse factoring, by contrast, the factoring partner takes on some or all of this risk.
#6 Speed: How Long It Takes to Receive Funding
Time is money, especially when your cash flow is in trouble. The faster you can receive funding, the better off you will be. Look for a company that can provide the funds in days, not weeks - ideally as soon as 24 hours after approval.
#7 Sales Team Experience
Finding a factoring company has an abundance of experience treating customers and their debtors with confidence, professionalism, and expertise is a very underrated way to have a positive, top-notch factoring relationship.
#8 Ease of Use and User Experience for Online Web Portals
We are firmly in the digital age, and no one wants to deal with clunky web portals or apps and have to resort to doing everything the hard way. An ill-designed and hard-to-use online portal is a nightmare that only frustrates customers looking to deal efficiently with their affairs.
Look for an online presence that is simple to use and easy to access and navigate.
#9 Additional Products Offered
You may find yourself with needs beyond simple invoice factoring. A factoring provider that can offer various additional products - like inventory borrowing, small business loans, and accounts receivable factoring - is a great partner when you need flexibility and a full suite of financial solutions at your disposal.
#10 Hidden Fees and Costs
Finally, it’s best to avoid companies that have hidden fees and costs. You should know exactly what the service will cost before you agree - and that means having a company that believes in full transparency and honest disclosure. In this day and age, hidden fees and costs are simply unacceptable.
If you want to find a factoring company that meets all of these crucial criteria, turn to Porter Capital and get instant funding for your business needs - all with the best customer service in the industry.
Contact Porter Capital Today
Ready to learn more about the benefits of working with an invoice factoring company to improve your working capital? Contact Porter Capital today to learn more about our factoring services or apply today!