5 Important Considerations Before You Pick an Invoice Factoring Company

Updated: Sep 14

There is no doubt that invoice factoring has become a convenient way to get the payments and keep cash-flow running. For businesses and startups experiencing some significant changes and growth escalations, accessing quick funds is necessary to keep up the operations and marketplace. To avoid business failures and possible cash-flow issues, businesses now turn to invoice factoring as a reliable solution. The reputable companies like Porter Capital have made factoring unpaid invoices an easy and smooth process. The company helps businesses in selling invoices and pays a good percentage of the invoice value, which they later collect directly from the customers. Not all factoring companies provide the same benefits and may charge relatively high commission or fee that is hard to pay if you are just a startup. This article includes five top considerations that businesses must go through when picking the invoice factoring company to get the funds. However, before that, let’s go through some of the reasons why working with an invoice factoring company is a good option.

What to Consider When Choosing an Invoice Factoring Company

There are plenty of invoice factoring companies, offering tons of financial benefits to the businesses. Choosing the right one requires you to consider aspects like pricing, confidentiality, contracts, flexibility, and stability.

1. Pricing – Transparent Fees & Rates

Pricing is, no doubt, one of the more essential aspects to consider when it comes to choosing an invoice factoring company. That is why it is necessary to do some homework before you make the final decision. There is a secretive approach that many invoice factoring companies use to charge businesses. The hidden costs mostly include additional administration fees when the funding cycle ends. Some factoring companies entice startups by showing the low-rates initially but charge them additional fees at the end of the funding process. In general, several things may affect the factoring fee. They may include monthly average purchase volume, number of customers (account debtors), contractual commitment, and the number of sold invoices. Even a slight variation in any of these things may lead to a substantial change in the fee structure of the invoice factoring company.

2. Stability

The stability of an invoice factoring company is a significant aspect to consider before you make a final decision. It is as important as finding a factoring company that sufficiently understands various business models, especially the one your business follows. You need to work with a company that has a reliable and robust track record in the finance industry. One way to ensure that you are signing with a reliable factoring firm is to choose one affiliated with the IFA (International Factoring Association). IFA members adhere to stringent policies and business ethics and practices. Porter Capital is a member of the IFA, along with several other associations and accreditations; they have been in business since 1991 and have a stellar reputation in the financial world.

3. Flexibility

The third important thing to consider when picking a factoring company is the flexibility it tends to offer to the customers. The expert business owners make sure to inquire about following things from his/her potential factoring candidate.

  1. What is the specific time length a business needs to remain in contract with the factoring company?

  2. Is there any personal guarantee a business is required to sign that makes a business owner responsible for unpaid invoices

  3. Does a company have to sell all its invoices?

  4. What is the minimum amount for the invoices a business needs to factor? Are there any penalties if a company will not be able to meet the requirements?

Asking all these questions is crucial to find out the flexibility level a factoring company is offering. It is worth mentioning that all these questions arise once you develop a relationship with a factoring company.

4. Confidentiality

Confidentiality is another vital consideration when a business selects an invoice factoring company. Most companies make sure to notify the customers after selling invoices. They also request the customers to make payments to their accounts. While many small businesses will not consider it a big issue, others may want to maintain discretion. The purpose is to retain control over the customers by not allowing the factoring company to indulge in direct dialogue. If this is also an important factor for you, it is better to look for a non-notification factoring firm that allows you to have complete control in handling customer payments.

5. Reviews

One of Porter Capital’s greatest attributes is they will frequently provide funding on factored invoices within 24 hours. This speed of deposit can help protect the revenue stream of your business and ensures you have the capital you need to complete projects and grow. Porter Capital is also strong in that they operate a very easy to use website, which lets customers know the critical information they’re looking for when researching factoring companies. They do a better job of disclosing their fees and discount rate ranges, as well as providing more details of their qualifying standards, which has helped them move into the list of the best invoice factoring companies. Check out the reviews of Porter Capital, available from the third-party website Trust Pilot if you are interested in learning more about what makes them one of the best invoice factoring companies in business.

Final Thoughts on Choosing the Right Factoring Company

In a nutshell, invoice factoring is an excellent financial transaction that businesses can avail to get working capital for their operations. However, businesses can only benefit from this finance alternative if they choose the right factoring company. To contact Porter Capital to discuss how invoice factoring can help your business find the working capital it needs, fill out the form below or head over to the apply page; happy hunting!

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Birmingham, AL 35203