Is Working with a Local Factoring Company Better?

Whenever a sales team member answers a call, one of the first questions they usually have to answer is, “Where is your office located?” Clearly, many companies prefer to deal with a local business because, to them, location seems important. Furthermore, many prospects are small businesses who like to operate based on personal relationships – the sort of relationships that require regular meetings.

Are local factoring companies better for you?

There is no simple answer to this question. Our view is that you should work with the factoring company that is best suited to help you. Location is only one feature, but it not necessarily the most important one. Most factoring transactions are executed by phone, fax, and email; so, from an operations perspective, your factoring provider could be anywhere in the country.

A better question is, “How do I determine if a particular factoring company is best suited for my business?” That’s a difficult question to answer, but here are some guidelines to consider:

  • Are they comfortable with the size of your company? Many factoring companies advertise that they work with both small and large businesses. Though that may be true, like any business, they are likely to be better suited to help businesses of a certain size. Remember the old adage, you don’t want to be anyone’s smallest or largest client. Ask them for the size of their average client.
  • Are they comfortable with your industry? Some finance companies have industries that they like and industries that they dislike. These preferences affect the kind of terms that you get. It’s usually a good practice to ask if they are comfortable factoring invoices in your industry.
  • Are you comfortable with the terms they are offering? This point is perhaps one of the most important things to consider. If you are not comfortable with the terms they offer, seriously consider finding an alternative. It’s a good idea to work with a financial advisor before making this determination.
  • Are you comfortable with them? Before entering an invoice factoring agreement, research your factoring company (ask for references!) and determine if you are comfortable working with them. Remember, you will probably speak to them regularly, so this matter is crucial.

If you find a local factoring company that meets all your criteria, then, by all means, work with them. However, if you find a good factoring company that is better than your local options, more often than not they are the better choice.

Disclaimer: Selecting a factoring company is an important decision. You should hire a competent advisor to help you through the process.

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