How to Select the Best Factoring Company

Finding the right factoring company for your business involves more than just searching the Internet, making a few phone calls, and hoping for the best. The decision to get factoring – or any type of business financing, for that matter – is very important and requires a careful, well-planned strategy to ensure that you find the best factoring company for your business. This article describes a simple strategy to help increase your chances of success.

Step One: Finding Candidates

There are a couple of ways to find factoring companies. The obvious way is a simple Internet search – which provides you with a long list of companies. Alternatively, ask your attorney or CPA to recommend companies.

Step Two: Interviewing the Companies

The next step involves interviewing factoring companies to determine which ones are a good fit for your business. Most prospects focus their efforts on finding a company that offers the cheapest rate. However, you need to know more than just their rates. Find out if they specialize in your industry and if they are a good match for your company’s size. These two points are critical. Although most factoring companies portray themselves as generalists who can work in almost any industry and help companies of almost any size, most factoring companies actually specialize in particular industries and in deals of a certain size. When interviewing a company, ask about these two very important issues. And ask enough industry-specific questions to ensure that the company really understands your industry.

Step Three: Submitting the Applications

Once you have finished the interviews, select the top two or three factoring companies to apply to. Applying to more than two or three factoring companies at once may end up wasting your time. Submitting the applications should be relatively simple. Just fill out the applications and submit all the requested information. Be sure to avoid these common factoring application mistakes. If all goes well, you should receive factoring proposals shortly after submitting your applications.

Step Four: Reviewing Proposals

The next step is to review the factoring proposals carefully. Our preferred review method is to create a spreadsheet listing all the important points and how each company ranks with respect to those points. Here is a partial list of criteria to consider:

  • The advance
  • The rate
  • Reserve requirements
  • Contract length
  • Application and commitment fees
  • Ancillary fees (wire transfers, ACHs, etc.)
  • Important legal terms
  • Industry experience
  • Other items specific to you

This process can be fairly complex, and if you’re not comfortable with it, secure the help of a CPA, financial professional, or attorney.

Step Five: Making the Decision

If the factoring proposals meet your criteria, the last step is to make a selection. However, before signing the contract, consider doing the following:

  1. Have an attorney review the contracts to ensure that they meet your expectations.
  2. Ask the factoring company to provide you with two references that are in your industry and are of similar size to your company. Ideally, these two references should have been with the factoring company for at least one year so that you get a good idea of how they treat their customers long term.

Can we earn your business?

We can provide factoring lines with high advances at low rates. For more information, get an online factoring quote or call (877) 300 3258.


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Disclaimer: This article is for informational purposes only. Looking for a factoring company and applying for factoring services is a complex matter. Seek legal and financial advice.