Invoice factoring is a great way to free up cash for your business. Often, when you are shipping out product on a regular basis, there can be a significant lag between when you ship your product to when you receive payment for it. Invoice factoring takes out the wait time by having a factoring company pay you for the invoice then they wait for the money to come. There are a wide variety of invoice factoring companies to choose from, so how do you decide which one is best for your needs? Let’s take a look at some points to keep in mind.
- Quick funding – When your financing and cash flow is on the line, you want a company that has a fast turnaround. A high quality factoring company will provide funding within 24 hours of receiving your invoices. Fast processing will ensure that you have the capital you need to keep your business going.
- Stability – You want a company that is financially stable. Some factoring companies do not operate with their own source of funds, but rather borrow from a third party which can delay your funding. When you are depending on a factoring company for cash to keep your business moving, finding out that they do not have money available for you could mean the end of your business or missing out on a key business opportunity.
- Simplicity – When factoring your invoices, the last thing you need is for it to be a complicated process. You need to be able to process them easily and efficiently. Look for a company that has a streamlined process for submitting your invoices and receiving payment. That way you can be sure that you will be able to get cash quickly when you need it the most.
- Factoring fees – Look for a company that has reasonable factoring fees. You should not be paying more than a few percent on each invoice. The factoring fees will generally be based on factors such as volume, turnaround time for payment, and the total dollar amount. Also, beware of hidden fees. Many unscrupulous factoring companies may charge additional fees that they may not reveal until after the contract is signed. Look for a factor that has an all-inclusive fee structure (no hidden fees).
One of the most important decisions you will make for your business is choosing an excellent invoice factoring company. When you choose the best company, you will be able to make better decisions for your business and also you will not miss out on key business opportunities because of a lack of working capital. If your business is struggling to keep up and has a lot of outstanding invoices, you need to consider taking advantage of the capital available to you in your invoices.