Factoring would be best described as invoice financing. It would concentrate on the business rather than the cash flow challenge faced by several businesses. The factoring company would focus on the creditworthiness of the clients. You would be required to develop a strong payment history with your customers in order to let factoring company pay up front for the invoice amount. However, most factoring companies may charge small factoring fee. They would release the balance when the client would settle the invoice completely.
In order to enjoy the several benefits offered by the factoring company, you would be required to choose the right factoring company suitable to your needs.
- Think about the service offered
The factoring company should offer professional and friendly services. They should offer you with adequate guidance on the process along with answering your queries in the best manner possible. They should help you make a good decision.
- Checking the terms of service
The terms of service offered by the factoring company should meet your needs and requirements. You should be aware about the contract fees, length, notice period and knowledge on other important factoring elements. You should be comfortable with the terms of service.
- Look out for services and products offered
You should be aware of the products and services offered by the factoring company. They may vary from one aspect to another. Based on the company that you intend to choose, you may get poor credit protection, credit control, funding options, customer credit checks, dedicated client manager and online account management. You should enquire about the services and products offered by the company. It should be imperative to your business. You should compare between best factoring companies prior to making final decision. Therefore, you should choose the best to suit your specific needs.
- Access to appropriate funding levels
Several factoring companies have been known to restrict the funding level provided against your customers. Therefore, it would be imperative that you should check that your customers would be able to access appropriate funding levels before actually signing the agreement.
- Factoring fees if any
Several companies may charge monthly fee based on the funding option settled between you and the factoring company. In some cases, the invoices submitted for funding needs for the respective month would determine the percentage. However, most companies may agree to monthly minimum that may not be suitable for companies having seasonal patterns.