Why does hiring a factoring company always look complicated? Apparently, most businesses that fear working with factors say they are confused by how things operate with these companies. And true, getting money from a factor isn’t always easy like it seems. There are a few hurdles to go through for instance. Below, we shall help you face these challenges and choose the best company to work with.
Determine what Factoring your Business Requires
There are several ways to get money from a factoring company. However, it all depends on how your business runs and how you want the money. For instance, you probably want money based on several invoices and not all. In this case, there are companies that will hike their charges while others will ask for more time to determine the creditworthiness of the specific customers in question. On the other hand, you may choose to work with a company that charges lower commissions when you give them all your outstanding invoices. Still, there are other ways to look at the factoring strategy. You can decide to hand over the work of collecting money from customers to the lender, and this may have adverse effects on your relationship with the customers.
Understand the Factoring Process
Basically, a typical factoring company pays you about 70-95 percent of the total invoices you give them. And once they approve your application, you could get the money in less than 24 hours. That means therefore that these companies do their due diligence far much faster than a bank takes to handle your paper work. In the end everyone wins, especially if you had already discussed or contentious issues like who take responsibility for customers who totally fails to pay.
Learn what Qualifies for Better Deals
Like with any business deal, there are people who enjoy better deals with factoring companies than others. While starting out for instance, you may struggle to find a company that can offer at least 70% of your invoices. On the other end, there are businesses that get almost 98% values from their invoices. Most of such businesses get such deals through continuous business relations certainly. However, there are a few modern companies that offer 100% of what the invoice promises but then asks for flat fees after every customer pays their dues.