It is important that you choose the right business factoring service for your business financing needs. The consequences of choosing a business factoring company that fails to meet your needs can have a negative affect on your companys financial bottom line as well as future business transactions.
To make sure you are making the right decision, weigh out your options and shop around. Here are some traits to consider in a factoring company provider:
Many reputable factors offer a wide-range of support services such as email, one-on-one meetings, and telephone support. Because there are several factoring companies to choose from, if a certain company only provides email support during business hours, it may be a good idea to leave this potential candidate on the back burner to see if you can find a factor that offers wider-reaching customer support services.
Experience in the factoring field
Some companies that supply business-funding options offer more than just business receivable factoring services. These account receivable factoring services may include merchant cash advances, small business loans, and a variety of other financing options to small and large business owners. While the jack of all trades type of financing companies may perform with excellence as a small business factoring company, and may even offer a lower discount rate, oftentimes you will find that you receive better services from companies that work strictly in the field of invoice factoring.
Professionalism and personality
It is important to consider how well the potential factoring company conveys themselves as a business. The company you choose will be in direct contact with your clients, so you will want them to have a positive personality and constant professionalism.
At the end of the day, it is your company's reputation on the line. Though you are only using a factoring company to help improve your cash flow situation temporarily, the outcome of your choice will have a lasting effect. If you choose a factor that acts unprofessional with your clients, the long-term consequences can be devastating through loss of client revenue and even negative word of mouth advertising.
Be sure to review some of the notifications that a factoring company sends out to clients, or even ask to listen in on a phone call between the factor and a business clients if you feel the need to. This point is too important to over look; again, it is not just a months worth of revenue on the line, it is your company's name and reputation.
Longevity as a company
The length of time that a factor has been in business speaks volumes about their business, their integrity, and their reputation. While new factoring companies can provide the same quality of services as established factors, length of time in business is indicative of a company that offers sound services.
As with any type of business funding, it's better to work with a company who has a history of providing services in your field, as they are more familiar with your needs and can effectively address your problems.
The most valuable insight that you can receive about a potential factoring company will come through their references.
When calling a factoring companys references, make sure you obtain key information by asking questions such as:
- Would you consider using this company for factoring services in the future?
- Was the application and approval process simple, or time-consuming and confusing?
- Did you receive any comments or complaints from your clients about the factor? If so, what were they?
- Did you need to ask questions during the process? If so, how would you rate the quality of support that you received?
- How long did you have to wait to receive your initial funding?
- How long did the factor take to approve your funding request?
- How quickly did the factor send out the remaining balance of your advance?
- Did you have any surprises during the process, such as additional fees, delays with payment or communication, etc.?
You may want to come up with some of your own additional questions, however, by asking the questions listed above, you should be able to determine whether the factor you are considering will be a good choice for your business cash advance.