Choosing a factoring company involves some research. While you’re comparing different services, here are a few things to keep in mind to make sure you’re choosing the best fit for your business’s needs.
Seek Transparent Rates and Fees
Transparency is important when it comes to the costs of the service. Some companies will either not be upfront about their rates and fees, while others will advertise low rates and tuck in pretty high fees. It’s important to ask the companies about their rates and additional fees while you’re looking for a quote. A good company will be upfront and honest about how much their service will cost you.
Understand and Avoid Penalties
Some factoring companies implement penalties for various things. When researching the company, find out if they have penalty charges and what triggers them so you can avoid them. Even if you’re still not completely sure about how invoice factoring works, after enough research you’ll develop a pretty good sense for which terms are fair and which ones are not.
Read Any and All Contracts
There are some factoring companies that will lock you into a long-term contract. Make sure you read everything (even if it’s lengthy) and understand all terms and conditions of what you’re signing up for. If you’re presently okay with signing a long-term contract, make sure their early cancellation fees are something you might one day be okay with paying, just incase you decide that you no longer wish to factor your invoices. Remember to read the fine print, or you might be stuck with a service you no longer need.
Cash Advance Amount
The advance rate is the percentage of the invoice value that you’ll receive upfront. A fair and typical advance rate is anywhere between 70-90% of the original value of the invoice. For instance, let’s say your client owes you $1,000. If the factoring company has an advance rate of 80%, they will give you a cash advance of $800.
Some traditional invoice factoring companies require that businesses submit all of their invoices from particular clients to be factored. Ask the company you’re looking into about their terms relating to this you before you sign anything. Even if you don’t mind, it’s important to know. Most small businesses typically prefer single invoice discounting. This allows you to decide which invoices you want an advance on, and in turn gives you control over your financing.
With just a little research, you’ll find a factor that offers you the funds, flexibility, and terms that work for your needs. For more information on how CoreFund can be the right factoring company for you, call us today at 800 405 5464.