After a business owner does his or her homework and determines that invoice factoring is the right choice, their next step is to choose a provider who can provide the right combination of integrity, professionalism and service. There are many factors to consider when making a choice, and some new details are listed below.
Penalties and Fees
Factoring companies may claim that they have the lowest available fees, but they often tack on extra charges that can considerably increase the cost of service. Look for the following information:
- Advance percentage
- Factoring fees
- Reserve requirements
- Setup and application fees
- Processing fees
- ACH fees
Knowing these extra fees can help a business owner determine which company offers the best deal. Some companies require clients to sign contracts, with stiff penalties for violating the contract’s terms and conditions.
It is in the business owner’s best interest to work with an experienced, well-established factoring company that has the knowledge and financial reserves they need. These providers know about business cash flow, and they will work with clients and clients’ customers in a professional, appropriate way.
Along with invoice factoring, many providers offer other assistance, such as collections on overdue invoices. Other services include:
- Background and credit checks on current and potential customers
- Invoice management
- Online account reporting
- Customer service
This is the hardest thing to assess when learning about factoring companies, but it is also one of the most crucial. Simply put, clients need to be able to trust the provider to do their job with integrity and professionalism. If the client uses the first few criteria on the list, they will have an idea of whether the provider is a match for their business. However, the potential client should use their business instinct when making a decision.
If the client doesn’t feel comfortable with a particular provider, they should keep searching until they find a good fit. By taking the time to research different factors, a company can find one that fits the business and its needs. While it may take time, it should be regarded as an investment with a long-term payoff.