5 Things to Look for When Hiring a Factoring Company

The 5 most important things when a perspective client is looking for a factor, well first of all of course pricing. Well a lot of factors will tell you pricing might not be the most important. Frankly, if we don't have our price competitive we really can't be competing for your business. So price is important in two ways: one is the basic factoring fee, and that's pretty easy to understand for most clients, but probably more important to understand is all the little extra fees that many factors put in a factoring contract, because those can dramatically change the cost of factoring. An example of a few of those: an initiation fee, a due diligence fee, a late invoice fee, a misdirected funds fee, just to name a few.  You want to understand each and every one of those before you sign a factoring contract.

Second would probably be industry expertise. You really want to work with a factor who understands the ins and outs of your industry. Why does that matter? Well it matters for a number of reasons; a really well versed account management team will be able to process your invoices faster, and smoother getting you your money quicker. Probably more important is someone who understands your business, will have a much better relationship with your customers. They will never have to be talked the business, they understand the ins and outs, and can have a respect for the very specific intricacies of your industry and how you interact with your client. So I think it's incredibly important that you have a factor who understand your business and your industry so that the relationship works as well as possible.

Third - flexibility, some factors are going to require, and rightfully so, a very rigid agreement with a fixed term, minimum transaction amounts and some sort of a penalty if you try to break the contract early. Others factors are going to give you levels of flexibility that at its extreme will allow you to factor for as long or short as you want, factor as little or as much you want, and factor whatever clients invoices you want whenever you want. So flexibility is pretty important to understand.

Probably fourth would be customer service. You want to get an understanding of the level of customer service your perspective factor offers their clients, and how they interact with those clients customers. How do you understand that? Quite simple, ask for references and do reference checks. Ask for a few clients, an old and a new one, and maybe ask for 2 or 3, 3 or 4, and then make the calls, and ask how your being treated or how that customer is being treated, and get some comfort there.

And probably lastly is stability. In difficult economic times you want to work with a factor that has been around for a while, knows what they are doing, has a balance sheet that can support you and your perspective growth. I think those 5 really characterize what's important when you are looking for a perspective factor.