Best Factoring Rates – How To Get Them?

Most companies seeking factoring use a shotgun approach in which they try to contact as many factoring companies as possible and submit as many applications as possible with the hope of getting the best factoring rate. While this approach is common, it seldom works. A better approach is to evaluate factoring in a systematic way and then zero-in on companies that best fit your needs. Here is how to do it.

Factoring rate = Perceived risk

From a factoring company’s perspective, it’s a simple equation: the rate they charge reflects the perceived risk of not getting paid back. The higher the perceived risk of your business, the higher the factoring rate. If you want to get the most competitive factoring rates, you must find a way to lower the factoring company’s perceived risk.

The best way to lower perceived risk is to follow these steps:

  1. Find a factoring company that is knowledgeable and established in your industry
  2. Present a professional image of your company
  3. Present a professional and complete factoring application

Does your finance company know your industry?

Let’s cover the first step. How do you determine if a factoring company is knowledgeable and established in your industry? The answer is simple: you ask them. Most factoring companies will tell you which industries they specialize in. This step is very important because factors who specialize in certain industries have a good understanding of those industries, and they can give the best rates.

It’s also wise to ask some key questions about your industry — just to make sure that they are as knowledgeable as they say they are. For example, if you’re in the transportation industry, ask about their freight bill and paperwork procedures, and about the shippers and brokers they’re familiar with. Additionally, ask them to provide a few references who have been clients for more than one year.

Present a professional image

The next step is to present a professional image for your company. While “image” is subjective, it can greatly influence the type of factoring proposal you get.

If the factoring company perceives your company to be professional, and, therefore, well run, it usually assumes a lower risk of default. This assumption usually translates into lower rates. Conversely, if your company is presented unprofessionally, your proposal will reflect that impression.

Present a professional and complete application

Most prospects don’t do well at step number three: presenting a professional and complete application. Most factoring companies are accustomed to getting applications that are difficult to read, are missing important documents, or just simply present inaccurate information.

This type of presentation has a negative impact on your proposal. Actually, if the application is poorly done, you may be declined a proposal.

Once you have selected the factors to apply with, it’s best to present a well-written, well-documented application. Use careful handwriting, give honest answers, and include everything the factoring company requests. And if you can’t provide something, make sure to be upfront about it in the application.

Be upfront about problems

This last point creates a problem for some prospects. Many companies look for factoring to solve their cash flow problems – and cash flow problems don’t look good in an application. So what do you do? We think the best strategy is to be honest and upfront about your company’s problems. Factoring companies are used to working with companies that, despite being in high-growth environments, have encountered cash flow problems. They usually understand. Just present any problems honestly, along with your proposed solutions.


The best way to get a competitive accounts receivable factoring proposal is to make sure that you manage the perceived risk of your application. You can manage this perception by selecting a factoring company that specializes in your industry, by providing a professional presentation of your company, and by making sure that your application is honest and complete.

Get more information

Are you looking for a factoring quote? We can provide competitive factoring proposals. For more information, please call (877) 300 3258.