In a previous post, we discussed the key benefits of factoring as a financing option for a small business or startup. For companies who are struggling to finance their business through traditional lending methods, factoring can be an excellent choice. It allows your company to access immediate cash flow, to fund further growth, and to bridge the gap between unbankable and bankability. With all these benefits, it is easy to see why many companies opt for invoice financing.
While invoice factoring can indeed offer an outstanding array of benefits, it is also important to ensure you are utilizing the best factoring company for your needs. Not all factoring companies are alike and choosing the right company to work with will be every bit as important as picking the right funding option for your small business. If you are interested in utilizing factoring services, be sure you read on to learn more about why you should choose the right company and tips on what to look for in the best factoring companies.
Why You Need The Right Company
Choosing the right factoring company is vitally important. While there are numerous invoice factoring services on the market, you want to ensure the company you work with has your best interest in mind and will help you reach your long-term goals.
The right company will do more than simply purchase your invoices and call it a day. They will take the time to get to know your company, ensuring you create a worthwhile plan to utilize your new form of funding. Choosing the right company is also critical as there are factoring services on the market that are not adequately backed by capitalization. It is vital that the factoring company you choose is well-established and capable of funding your needs.
Tips On What To Look For In The Best Factoring Companies
Clear & Open Communication
First off, the best factoring companies will offer clear and open communication. If you find that it is difficult to get a straight answer from the factoring company you are working with, this should raise a red flag in your mind. A quality factoring company has nothing to hide and wants to ensure they know as much about you as possible. Look for a company that invests a large amount of time and effort into communication. They should spend time learning more about your business, your goals, and assessing whether or not factoring is a good choice for your funding needs.
Realistic Promises
Watch out for factoring companies who promise things that seem too good to be true. Many factoring companies will boast of things like 24 hour approval or the lowest factoring rates on the market. Before you simply take these promises at face value, ensure you take the time to do your due diligence. Often, these companies are making outlandish promises because they are hiding the reality of what will come. For example, the lowest factoring rate might be because they will tack on hidden fees down the road. Look for a factoring service that makes realistic promises.
Choosy With Their Clients
When a factoring company seems to have little to no barrier for acceptance, this isn’t a great sign. Good factoring companies will be choosy about the clients they work with. By performing their due diligence, they are better equipped to create a lasting relationship with their clients. This is a good indicator of a well-established company who isn’t on the prowl for any company they can snatch up.
Adequate Funding
Did you know that there are cases where a factoring company does not have the adequate funding to continue to provide a credit line to their clients? In these cases, funding might be cut off suddenly. Make sure that you work with a reputable factoring company who has adequate funding from reliable sources. Be sure to ask about this prior to signing on any dotted lines.
Solid References
Another good indicator of the best factoring companies is the ability to provide solid references. If a company has no previous clients they can point you to or case studies they can show you, it is a good idea to stay away from doing business with them. When you are considering invoice factoring, be sure you ask for references first.
Transparent Fees
As mentioned above, some companies will promise an astonishingly low rate when compared to other factoring companies. What many of them won’t tell you is that there will be a slew of hidden fees that make that competitive rate meaningless. Be sure you opt for a factoring company that doesn’t wind up adding in things like minimum usage, lockbox, credit checking, and wire transfer fees.
A Plan For Your Future
Finally, choose a company that views factoring as a part of your path to a bankable future. While invoice factoring can be an excellent stepping stone for your business, you want to utilize it in conjunction with a plan for your future. Here at the Commercial Finance Group, we are passionate about helping our clients build a bridge back to bankability through our unique funding solutions.
If you are interested in invoice factoring as a form of funding for your small business, we invite you to reach out to our talented team. We have years of industry experience and we can help you determine whether or not factoring is the right option for your needs. Talk to us today and learn more about building a bridge back to bankability.
