Traits to Look for in a Factoring Company
Choosing the right factor for your business’ accounts receivable financing needs is important and the consequences of choosing a business factoring company that fails to meet your needs, can negatively affect your company’s financial bottom line and even 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.
Professionalism and personality
How well does the potential factoring company convey themselves as a business? The factoring company you choose will be in direct contact with your clients so you want a positive personality and constant professionalism.
At the end of the day, it is your company’s reputation on the line – you are using a factoring company to help improve your cash flow situation temporarily, but you have to live with the outcome of your choice for a long time into the future. If you choose a factor that is short with your clients, is rude, pushy or any other flavor that describes unprofessionalism at its finest, the long-term consequences can become devastating through loss of client revenue and even negative word of mouth advertising.
Ask 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 overlook; again, it is not just a month’s 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 integrity, their business, and their reputation. While new factoring companies can provide the same quality of services that established factors can provide, 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 factoring loans in your field because they are more familiar with your needs and can address your problems.
Many reputable factors offer a wide-range of support services such as email, one-on-one meetings, and telephone support. Quite honestly, 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 accounts receivable factoring services such as 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.
The most valuable insight that you can receive about a potential factoring company will come through their references.
When calling a factoring company’s references, make sure you obtain key information such as:
- How long did it take the factor to approve your funding request?
- Was the application and approval process simple, or time-consuming and confusing?
- 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?
- Did you receive any comments or complaints from your clients about the invoice factoring company? If so, what were they?
- How quickly did the factor send out the remaining balance of your advance?
- Did you have any surprises during the process? Additional fees, delays with payment or communication, etc.
- If you were to consider using factoring services in the future, would you use this company again?
You can come up with your own questions if you want to, but by using the above, you should be able to determine whether the factor you are considering will be a good choice for your business’ funding.