How to choose the right factoring company:
There are many factoring companies to choose from however not all provide the same level of service and funding options. There are a few points to consider when choosing the right factoring company for your business.
Choosing a factoring company who provide a friendly and professional service is very important. The factor should give you the support you need to help guide you through the set up process and be on hand to answer any questions you may have, without using any jargon.
Always ask the factor to provide Client testimonials and this way you can ask other business owners about their experience, before making your decision.
When deciding which factoring company to use, make sure they explain clearly the terms to you and that these have been tailored to your specific needs.
Look through the details and understand the contract length, notice period, fees, concentration etc, to ensure you are comfortable with the terms. All good factoring companies will happily explain these to you in full.
3. Products & Services
Understanding the various factoring products and services and how they differ from one factor to another can help you choose the right factoring company for your business. Here are some general factoring products and services available through most factors.
- Funding Options: Confidential Invoice Discounting or Invoice Factoring
- Credit control
- Customer Credit Checks
- Bad Debt Protection
- Online Account Management
- Dedicated Client Manager
4. Understand the Credit Control Process
One thing that differs greatly between factoring companies is the way the credit control function is conducted. If you choose for the factor to collect payments from your customers it is important to find out:
• How will factoring be introduced to your customers?
• Will you have a dedicated credit controller, or will this change depending on workload?
• How many Clients do they deal with?
• In what manner will a factor contact your customers regarding payment – email, phone, letter, or all of these?
• When will a factor be contacting your customers if payment has not been made – can they tailor this to different customer credit terms?
• What happens if your client does not pay the factor?
Some factoring companies will restrict the level of funding they will provide against your customers. Check before signing your new agreement that your customers will be funded to the levels you need. E.g. if you do most of your business with one customer your concentration would be 100% and some factors would restrict this to 20%, meaning an invoice of £10,000 would only release less than £2,000 of funding for your business.
In most instances the factor will charge a monthly fee depending on the funding options you choose. This will often be a percentage of the invoices submitted for funding that month. Some factoring companies include a monthly minimum which often would not work if the business has seasonal trading patterns.
Make sure that the factoring company can be flexible to your needs and is willing to review your facility as your grow. For more information visit our blog 'How much does Factoring Cost?
Some factoring companies specialise in a just few industries, while other factors can cater to almost all sectors. Finding a factor that has experience within your industry will mean they understand your business better and how best to set up a facility that will work for you.
For more information about how to choose the right Factoring Company or to enquire about how Calverton Finance can help you, please call Helena Cairns on 01908 268888 or email here.