In the last decade, accounts receivable factoring has become a cost-effective and popular option for companies seeking to boost cash flow temporarily or for the long-term. Factoring companies serve different industries, offer varying rates, and have their own requirements.
Factoring Companies: Rates and Fees
The minimum rate percentage charged by most invoice factoring companies varies from one to two percent. Rates can increase as the receivables age and factoring volumes drop. An initial rate of 1% can quickly become 3% if the accounts receivable age to 60 days or more. Do your homework on the factoring company's rate structure before signing an agreement.
It's important to ask different companies about their rates so you can get a good idea of the average cost of factoring financing. Knowledge of these rates can help ensure you work with companies that aren't offering suspiciously low or unreasonably high rates.
Other fees you'll want to identify include termination (cancellation fees) and monthly minimum fees. Some companies charge additional fees to generate more revenue. Many factoring companies have no startup fees or cancellation fees. Other factoring companies charge a startup fee, monthly minimums and cancellation fees.
Eligibility Factors with Factoring Lending
One of the important factors in choosing factoring services is the list of eligibility requirements published by each factor. Every factoring company has a minimum and maximum credit facility. Credit facilities can range from $100 to $10 million or more. You'll need to find a factoring company that fits your size.
There are other features that may also influence your decision to work with one factoring company versus another. For example, some companies have monthly minimums. If you don't factor the minimum amount of invoices in a particular month, then you could get charged with a monthly minimum fee.
Business Factoring and Customer Support
Customer service is often something that business owners don't think about until they actually need help, and good customer service can mean the difference between getting your money's worth from a business and experiencing costly hassles.
One of the factors to consider in customer support is the number of ways you can contact invoice factoring companies.
Different methods include telephone, live chat, and email. Some companies also offer a dedicated advisor, which can become a significant bonus for any business setting up their first account with an accounts receivable factoring company.
You may want to speak with other business owners who work with various accounts receivable financing companies to gauge the quality of customer support. Do they respond promptly to emails? Do they pick up the phone during business hours? Is it possible to contact them in a variety of ways?
Finding the Best Factoring Company
Look at our guidelines on how to select a factoring company. FactoringClub provides excellent help to businesses looking for the most advantageous factoring lending agreement.
With Factoring Club on your side, you’ll receive free services including:
- Financial Consulting
- Factoring Guidance
- Factoring Company Selection
For new businesses, startups, and companies with cash flow problems, factoring financing is a cost-effective option when traditional loans aren't on the table. As with any agreement that may impact the financial health of your business, it's important to compare different companies offering factoring services before signing a contract.
FactoringClub.com is the premier source of information for invoice factoring companies. With factoring companies in most major cities and states, FactoringClub helps you find the right factoring company. Search our listings or call our factoring experts at (866) 748-7111 for assistance.