Factoring is a great way to build up your company's cash flow. However, some factoring companies are much more reliable than others. To find a provider that will best serve your business, you need to avoid these common factoring pitfalls:
Paying Hidden Fees
Make sure you understand a factoring company's fee structure. Beware of "hidden" fees that cover money transfers, software, collateral and other business costs. Ask if the factor charges only a flat fee, which is a percentage of your total invoice value. Be prepared to negotiate the removal of these fees if they exist.
Bad Customer Service
Make sure you can call your account representative directly when you need information. Lousy customer service is a leading reason why companies leave their factoring provider. When talking with a factoring company, ask for a dedicated, single-point-of-contact to manage and answer questions about your account.
Limited Funding That Hampers Growth
Before entering into a factoring agreement, make sure the factor has enough financial resources to continue funding your invoices as your company and receivables grow.
No Access to Aging or Reserve Reports
Some factoring companies make it difficult for you to see your account information. Make sure you can access your account balance, aging and reserve reports online. This is critical information you need to run your business effectively.
Being Forced to Fax Documents
Many factoring companies still require their customers to provide original documents for each transaction. Look for a factoring company that allows you to easily upload invoices and other documents online.