7. How to Choose a Factoring Company

  1. The factor will be interacting directly with your customers so it is crucial that the factoring services company won’t adversely impact customer relationships.  Here are a few things to look for in a factoring company:

    Professionalism

    The factoring business should represent your business professionally when dealing with customers.  A good way to ensure you choose a reputable company is to check references- ask for past client lists, and contact as many as you can.  Ask other businesses if they have used a factoring service- would they recommend a specific company?  You can also ask to see sample correspondences between the factor and invoiced companies, or ask to listen in on a collection call.  Make sure the factor represents your business appropriately.

    Length of time in business

    Longevity can speak volumes about integrity and reputation.  Though new companies can provide the same quality of service as an established factoring business, choosing a well-known or established factor can go a long way in ensuring you’ll be satisfied with the services you receive.  It’s also a good idea to work with a factoring company that has experience with accounts receivable loans in your industry.  Companies that are familiar with common practices and industry standards are usually more able to meet your specific needs.

    Customer service

    Choose a factor that will provide a high level of customer service to your clients or customers.  Ask whether the factor is available to take calls, emails, or receive mail- some don’t.  Can customers contact the factor for billing questions?  Will you be kept “in the loop” as customers make payments?  Make sure that you’re provided with an acceptable level of service.

    Factoring experience

    Many factoring service providers also offer additional financing products, like merchant cash advance, small business loans, or other merchant services.  Ask about a company’s experience with factoring in particular.  Factoring requires a high level of customer interaction and follow up that might not be necessary in other types of business financing.  Make sure the company has experience in providing the type of transaction you seek.

     

    Go to... 1, 2, 3, 4, 5, 6, 7, 8, next page

     

    << Back to Articles in Financials