estions to Ask a Factoring Firm Before You Partner with Them //

Every business owner will encounter the difficult situation of more money leaving their company than coming in. Cash flow problems can quickly lead to cash shortages that make it difficult for business owners to pay payroll, daily operating expenses, and to meet rapid growth and expansion requirements. You may have heard of factoring if your company is struggling to raise cash.

What is invoice factoring?

Invoice Factoring is not a new solution to cash flow problems. It dates back thousands years to ancient Mesopotamia. Businesses can sell outstanding receivables to the factoring company (the factors) at a discounted price. The factor provides a quick advance and takes over the responsibility for collecting payment from customers. The invoice is paid by the customer and the factor receives the balance, less a small fee.

Factoring is a popular way to finance your business because of its flexibility and ability to grow at a faster rate than your company could. There are many factoring companies available today. Many are reliable and trustworthy business partners. However, some lack transparency, support, technology, and transparency. To ensure that a factoring company is a trustworthy partner for your business, you need to ask a few questions before you commit to their services.

Security Business Capital’s team has put together a list with eight questions that will help you get started.

What speed can I get funding for my business?

Invoice factoring offers the advantage of securing next-day funding. Factoring invoices can make it possible to get cash quickly in 24 hours, instead of waiting for payment from customers for 30, 60, or even 90 days. Compare factoring companies to ensure you get the money you need when you need it.

What is your factoring rate of advance?

Factoring invoices is a cost-effective way to get your business more sales. The advance rate for most industries is between 80%-95% of invoice value. After the invoice has been paid, the balance is remitted less a fee. Although fees can vary from one factor to another, they tend to be between 1-3%.

Which industries and business types are you involved in?

Thanks in large part to technological advances, factoring companies are now able to target specific industries and make this financial tool easier than ever. Factoring is a great tool for many industries, including oil and gas, transportation, staffing services and construction.

Are you able to offer both recourse funding and nonrecourse financing?

There is a choice between recourse and non-recourse factors. Recourse factoring, which is the most popular, means that your company must pay any invoices the factoring company cannot collect. Non-recourse factoring is where the factor takes on the majority of the risk in collecting an invoice. Non-recourse factoring fees are slightly more expensive because of the increased risk.

Are you a firm that requires every invoice to be factored

Factoring companies may require that their customers submit all invoices from their customers for factoring. This is because they want to take as little risk as possible. The requirements will vary from one company to the next. You may not need to factor every invoice. For example, you may not want to factor the invoices of customers who are less financially stable. You may only want to factor customers that are less financially stable.

How much support do you provide your team?

Reputable factoring companies will provide you with immediate capital as well as exceptional back-office support. This can help you save valuable time, money, and resources. Ask for details about the services offered by potential factoring partners when you speak with them. How does the factor collect customer debt? Are they able to help you track payment progress and maintain records? Are they able to offer perks such as free credit checks for existing or new customers? They should be considered an extension of your accounting team, so you can focus on your business growth and seeking out opportunities.

Is your funding able to support my rapid growth?

Factoring invoices is a more flexible option than traditional loans. Your business can grow the funding via factoring. The number of eligible invoices that your business must factor will determine the amount available. Your business’ credit score will increase as you grow and establish a solid relationship with the factor. Make sure the factor you select has the financial and experience to support your company’s growth.

How will you deal with my customers?

Many business owners worry about the reaction of their customers to their notices regarding factoring. Your customers may already be familiar with factoring. Some of them may have even used a factoring service. The fact is that the factor will only contact your customer to confirm details. It is important to ensure that the factoring company you choose is professional and friendly. This will help strengthen your customer relationships.

Security Business Capital Invoice Factoring Services

Looking for an invoice factoring firm to work with you long-term? Security Business Capital’s dedicated team is the right choice. Our experts are dedicated to helping businesses get the money they need to grow and operate their businesses smoothly. We have solutions for many industries, including oil and gas, business services, personnel, manufacturing, distribution, transport, and staffing.

Contact ustoday if you have further questions regarding invoice factoring and how our services work.

The post 8 Questions to Ask A Factoring Company before Partnering With Them originally appeared on Security Business Capital.

Author: Justin Young

Justin Young HoneyHat™