How to Choose an Invoice Factoring Company
In the business world, having to wait for almost a month to get paid is one of the greatest challenges that many businesses face. For this reason, most businesses turn to invoice advance loan in order to meet their short term financial obligations. With the increase of business factoring services, it is now possible to maintain cash flow as well as ensure business credit. However, there is still a lot that people do not know regarding invoice advance loan. Ideally, there is always the risk of rushing through the process of applying for an invoice advance loan. When this happens, there are chances that you will get a raw deal when seeking capital credit factoring. You often find that there are many commercial factoring companies with each having different terms and conditions that ultimately have an effect on B2B companies. Without adequate research and understanding of invoice advance loan, there is no telling whether you are getting value for money in the deal. If you are considering invoice advance loan, below are some of the things you should look out for in business factoring companies.
Are There Hidden Charges?
One of the questions that you should ask yourself when seeking invoice advance loan is related to hidden fees. There are instances where factoring companies fail to disclose all their charges meaning that if you are in violation of the terms of contract, then some fees will apply. Be very thorough when conducting your research about the factoring company. Check whether the company charges for credit checks as it happens to be one of the most expensive hidden charge that factoring companies apply. For businesses factoring in multiple invoices, then credit checks are necessary to ensure that the business maintains a healthy cash flow. However, the factoring service should make full disclosure on credit checks instead of sneaking the charges into your contract. As long as you are able to go through every detail on the contract before accepting the terms, then you are guaranteed of not missing such fees that can add up the cost to your business.
Does the Company Offer Non-recourse Factoring?
The concept of non-recourse factoring to your business is also an important factor to consider when choosing a factoring service. Ask yourself whether the company you are considering offers non-recourse factoring. Non-recourse invoice factoring means that the factoring company is able to advance you the funds but without the risk. If you receive funds from the company for your invoices and the customer fails to honor the invoice, then the factoring company is not supposed to pass the charges to you. Failure to make payments by the customer is a major challenge for many businesses. There is no guarantee that the customer will pay meaning that your business cash flow can easily be killed depending on the amount owed. This is the reason why factoring services always pass the risk of debt default to the business owner instead of taking the risk themselves. Non-recourse factoring can be a major advantage to your business as you are relived the risk of such debt defaults.
How Much Cash will be Advanced?
Different factoring companies will advance you different percentages of your invoice. This means that you are better off working with a company that will advance you the highest amount possible. It is actually possible to find a factoring company that can advance you up to 96% of your invoice. As earlier stated, doing some background research on the factoring business is what makes the whole difference. Do not limit your options but rather, seek as much information as you can about different factoring companies. After this, compare the terms, the amounts to be advanced as well as other factors that add value to your business. By doing this, then choosing a factoring company should not be a challenge for you or your business.