Cash flow problems are one key reason why businesses fail. You can’t take advantage of opportunities if you can’t conjure up enough liquid capital. One big cause of cash flow problems is all of the invoices that you let languish in the past due pile.
Many small business owners use factoring companies to resolve those invoices. What does a factoring company do? It collects on those invoices for a percentage.
Of course, you want the best factoring company you can find. That brings up the problem of how to choose factoring company. If you’re interested in finding a factoring company, keep reading for six factors you should keep in mind while choosing one.
- Experience in Your Industry
Every industry has its odd little quirks. Spending your time explaining all of those quirks to a factoring company is a waste of everyone’s time. Look for one that already has experience in your industry.
- Time in Business
When you work with a factoring company, you put the financial health of your business into the hands of a third party. You don’t want some fly-by-night company that opened six months ago. You want a company with several years of experience in the rearview.
Before you sign on with a factoring company, make sure you understand clearly what percentage they take off the top. In addition, most factoring companies bundle in some fees. Ask to see a fee schedule that gives you a transparent breakdown of what they’re charging.
- Customer Service
Ever work with a company that provides terrible customer service or makes you navigate a maze of phone menu options before you can get to a person? That’s is a frustrating experience for anyone doing business with that company. Look for a factoring company that offers a solid customer service experience.
You want to know the terms the company uses before signing up for any kind of invoice factoring for small business. While a useful service, factoring ultimately costs you money. You want to know how easy or difficult a company makes it to sever that relationship.
Reputation can prove a difficult thing to judge with B2B businesses like factoring companies. You can still poke around online and look for customer reviews. You can also check with the Better Business Bureau and see if they maintain a listing for the company.
If the company plays fair, you should see some evidence of it in the reviews of BBB rating.
Getting the Best Factoring Company for Your Business
Your finances are the lifeblood of your business. That means you want the best factoring company for your business. Getting that company calls for minding all of the factors noted above.
It also means taking stock of your personal impression of the company. If you get a bad vibe from a factoring company, leave them behind.
There are lots of factoring companies out there. Find one that makes you feel comfortable.
Looking for more business finance tips? Check out the posts in our business section.