Considerations When Choosing an Invoice Factory Company for Your Business
Invoice factoring is a type of account receivable financing by factoring companies that converts outstanding invoices due within 90 days into immediate cash for your small business; they make upfront payments of up to 90% of the original invoice.
For a business whether large or small, keeping cash flow constant is necessary for the continuity of your business operations. This means having access to ready cash to meet regular operation costs such as sorting small debts, acquiring raw materials, fuel, salaries or service payment.
Choosing the Best Invoice Factoring Company
There are many options when it comes to business factoring companies. But finding the right one is often a challenge considering how every business is self-positioned as the most reliable option available on the market. Consider the following things when choosing an invoice factoring company for your business.
1. Ready Cash
The whole idea of business factoring companies is ensuring businesses have access to funds within the shortest time possible, ideally within 24 hours. This helps businesses to operate smoothly and keep your cash flowing.
2.Simple Invoice Factoring Process
Even if you’re guaranteed cash-at-hand but the process of acquiring it is cumbersome, it’s not worth it. Good business invoice factoring companies have simplified the approval process from the moment you apply for factoring to customer creditworthiness background checks.
Small businesses, especially those that fail to secure funds through traditional lenders such as banks have really benefited from invoice factoring services. Some factoring companies now even allow you to apply without paying any administration fee. This has made the entire process easy and fast.
3. Reliable Customer Care Support
Once you begin the application process you are assigned an account manager to guide you through the factoring process. This is the contact person between you and the factoring company. Without an account manager, however, the process can feel slow and confusing.
4. Types of Invoice Factoring
Recourse and non-recourse factoring are the two types of invoice factoring and they are different in that: Recourse factoring exempts the factor from the risk of bad debts should a customer fail to pay. Meaning that they’ll still recover their money from you and thus a loss on your end. The factoring agreement will essentially define the refund recovery period and therefore you bear all risks of bad debts.
In recourse factoring, you’re liable to pay both the refund and any cumulative interests as stipulated on the factoring contract. However, recourse factoring is more budget-friendly than non-recourse factoring and often has a simple factoring application procedure.
Non-recourse factoring, on the other hand, let’s the factor assume all the risks involved with bad debtors though it doesn’t directly insurers unpaid debts due to genuine disagreements. As a result, non-recourse will be relatively expensive than recourse factoring. As a business owner, you never have to refund or suffer bad debts, however, you must clear the interests accumulated from the advance for the period until the debtor failed to pay. In turn, the factoring company proceeds to recover the debt by all means including legal pursuit.
5. Invoice Factoring Minimums
A good factoring plan will have no minimums, which is so crucial for small businesses with irregular cash flow. Though minimums also offer you an added advantage when it comes to negotiating for better terms. Most business factoring companies have no minimums.
6.Complimentary Factoring Services
Top transportation factoring companies offer more than just converting invoices into available cash. They also help your business to:
- Make important business credit decisions
- Debt and receivable collections
- Offer fuel card and discount program
- Offer financing solutions and advice
- Help manage your turnaround situation
- Reliable customer care support
Business factoring companies facilitate crucial business operations and improve efficiency in service delivery by availing immediate cash flow. When entering a factoring agreement consider short contracts that allow you more flexibility, especially when switching to a new factoring company with better terms.