You have numerous options when it comes to factoring companies. In order to find the best possible factor for your business needs, there are several questions you need to ask about the factor. Considering this is a long-term relationship, choosing the right one the first time is important. You can access a full list of factors from the Asset Based Finance Association, or ABFA. A good recommendation is what to look for.
Interaction With Customers
Check whether the factor company communicates with customers or not. Be sure you understand their procedures so you do not lose customers due to poor treatment. In addition, ask how quickly debts are typically collected. Slow collection rates could result in extra fees or even bad debts.
Interaction With Your Business
Ask how the factor interacts with your business. Factoring companies that stay in close contact with you are best. You always know where you stand and how debts are being collected. However, the two of you should agree on policies and procedures. Ensure you ask about agreement termination terms. Some require as much as a year’s notice and early termination fees can be steep.
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