Choosing Your Factor
When searching for factoring services for your business remember these key elements to make sure you do not end up on the end of a factoring relationship that is less than desirable.
1. Most factoring companies are very comparable in the rate they charge for services. With that said, the ones that are much lower than the rest are usually buying your business, or are brand new to the business, or do not spend their money on customer service that puts you first. Old adage applies- “If it is too good to be true, it usually is!”
2. Make sure to see what other industry specific deals and discounts they can get you to lower overall costs of business or reduce work load. For instance in transportation look for factoring companies that have things such as free load board access, fuel card discounts, online reporting, free credit checking on customers you plan to work with, industry connections that can help you grow or even start out.
3. Do not get stuck in a long term contract! I repeat, Do not get stuck in a long term contract! Factoring companies that require long term contracts are only doing this to lock you up for life! Its one thing if they offer one as an option for lower rates or extra services, but another if they just do business that way. There are plenty of companies that do not require long term contracts. Also be sure to read your factoring agreement to make sure they didn’t just tell you one thing and signed you to another.
4. Make sure when shopping, that the factor doesn’t file a UCC on your company the second you decide to ask for a proposal from them. A UCC basically ties you to them even if you just wanted to find out program details. A factoring company files a UCC to basically have some type of collateral to back the fact that they are giving you money up front expecting to get paid back. Good factoring companies do not file their UCC on you until you are a client for sure!
5. Always, I repeat always do your research. If you do a basic online search on the factoring company that you are interested in you will find all the dirty laundry that this factoring company has done. Search the Better Business Bureau, Rip Off Report, or just put the name of the factor and the word reviews or complaints. This will allow you to find out what others that have used them in the past have been dealt with.
I hope this helps the next time you are searching for business financing and feel free to LinkedIn message me with any questions or comments.
Senior Business Development Consultant