small business cash flow

5 Tips for Choosing the Right Factoring Services

If you are running a small business, you’ve probably found yourself in a frustrating, but very common situation. You may find that your business is running low on cash. Your customers could owe you plenty of money for your goods or services, but without cash on hand you will have cash flow problems. Collecting on outstanding invoices in a timely manner can be a frustrating process. If you are thinking about taking out a loan or cash advance, you may have heard of factoring companies that provide these types of services. Choosing the right financing broker to help your business can be difficult. There are literally thousands of options available in most areas of the country. This article tells you what to consider when choosing the right factoring service in Kennesaw, GA, to meet the needs of your business.

How Does Factoring Work?

First, choose a factoring company in Kennesaw, GA, that can provide multiple options to meet your needs. Invoice financing, or factoring, allows a business owner to sell outstanding invoices to a company in exchange for immediate cash. This cash flow injection can help fund the day-to-day operation of your business for various other expenses. You want to ensure you pick a company with multiple options, as well as a company that has lots of experience.

invoice factoring timeline

Types of factoring loans include: loans where your business assumes the risk of invoices not being paid by your customer, loans where the factoring company assumes the risk so that your business is protected, and one-time loans for very specific situations. You should familiarize yourself with factoring terms like: recourse, non-recourse, over-advance, and NOA. Second, as there are so many options available, you should probably talk to multiple companies to determine which will meet the needs of your business best.

The factoring company with the lowest offer may charge more than the others in unexpected fees or hidden costs.

Other Points to Consider When Choosing the Right Factoring Services

Make sure you receive a written proposal from the factoring company that you decide to go with, and make sure that you read the fine print. It is important to understand what fees may be incurred by your company due to late payments, interest, or other penalties built directly into the agreement. The factoring company with the lowest offer may charge more than the others in unexpected fees or hidden costs. There may also be other terms or conditions that limit your flexibility to pay the debt back or unnecessary terms that may make the agreement unacceptable. Finally, consider quality customer service. Work with a company that will be accessible and pleasant to deal with.

How to Choose the Right Factoring Services:

  1. Communicate your needs clearly
  2. Only sign a contract after carefully reading and understanding the language
  3. Be sure funding deadlines make sense for your business
  4. Will you be able to reach a decision-maker if you run into service issues?
  5. Do they specialize in your industry?

It may seem like common sense, but financing agreements can be complicated. Legal jargon makes it hard for the average small business owner to understand the specifics. If there are conditions in your agreement that you did not previously discuss with the factoring company, this can be a red flag. Be sure to understand exactly what hidden costs or penalties may be built into the agreement.

Communicate your needs clearly, so the factoring company has the best chance to solve your cash flow problems. Don’t try to hide anything from the underwriting team. This can eventually come back to bite you. Instead, lay out what kind of financing you need to grow. Then, the factoring company can help you achieve that growth.

Does the Factoring Service Make Sense?

Factoring services are mostly alike, but you need to be choosing the right factoring service for you! Factoring services will vary on credit limits, same-day funding deadlines, costs of funding, and debtor approvals. Will you want a recourse or non-recourse facility? Ultimately, the right factoring service will be able to work flexibly with your business needs in order to help you grow. You don’t want more trouble than it’s worth. If you have specific industry challenges, partner with a factor that specializes in your industry sector.

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13 Comments

  • Gloria Durst

    August 29, 2017

    I agree that you want to consider reading the fine print when choosing a factoring service. It would make sense to find out the specifics of a contract before you choose them. In addition to this, you may want to talk with past clients to see what they think.

    Reply
  • Ian Varley

    August 30, 2017

    Thanks Gloria – yes we are happy to provide both past and present clients as reference sources and agree they are a great source for additional information when considering Eagle as a funding partner!

    Reply
  • Nova

    March 21, 2018

    Yes, I agree with this. It is really important that the factoring company has the best customer service offer. Thanks for sharing these tips.

    Reply
  • We Factor

    May 11, 2018

    Thanks for sharing this . I agree with what you said. Factoring for business is definitely frustrating things to do. I find your tips very helpful.

    Reply
  • We Factor

    May 14, 2018

    Factoring service is I think very helpful for a small business. Thanks for sharing this tips for choosing factoring service . I think a lot of businessmen reader will love to read this article.

    Reply
  • Jenna

    October 4, 2018

    Thanks for sharing these great tips. I will definitely follow all of these. I believe that these tips will definitely help me get the right factoring partner for my business.

    Reply
  • Nova Cash Flow

    October 24, 2018

    I totally agree with what you said. I think that we should always choose the factoring company that will totally suit our business and will meet our needs. Thanks for sharing this article.

    Reply
  • Ian Varley

    November 13, 2018

    Factoring is a really great mechanism for getting small businesses the working capital funding they need to grow as long as you pick the right partner. Make sure they are able to answer all your questions and have an experienced team able to handle your needs.

    Reply
  • We Factor

    January 31, 2019

    Factoring is one of the great financing aid for businesses. I also think that it is very important that we have a knowledge about how to choose the right factoring provider that is right for our business. Thanks for sharing this article.

    Reply
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