What to Consider When Choosing an Invoice Factoring Provider

What to Consider When Choosing an Invoice Factoring Provider

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Once you have decided that Invoice Factoring is right for your business, now you have to choose the right invoice factoring provider. As there are various different types of companies, which range from major financial institutions to SMEs. This is why you should consider the following 4 factors when you are trying to pick the invoice finance company to work with.

Are you just a number?
Most of the time, factoring is provided by banks and large financial institutions. This is why it is often the case that you will have to deal with multiple contacts or ‘client managers’. As they will have a large amount clients. This wouldn’t be the case with smaller finance companies. As they you will most likely to have the same person throughout the process. This will also mean that you will benefit from quick decision-making and approval, as well as the having a bespoke package for your business. Above all else, ensure that your provider is trustworthy, reliable and that they understand your business. As you will be dealing with your invoice factoring provider on a regular basis.

Will the contract be based upon minimum monthly invoice volume?
Many businesses will base contracts on minimum monthly volume. Which means they will only work with clients that do a minimum monthly volume of invoices. However, this can cause problems, especially for small businesses. Monthly invoicing can be variable. So it may be worth looking for a factoring company that is based on quarterly volume. As it is a fair system that takes variations into account.

Will you have to have a long-term contract?
A number of finance companies will want to tie you into a long-term contract. As a result, their notice periods can be up to a year. Which may not suit a business whose customers pay on different terms and may have changing needs which in comes to financing. Thus, your business may want to consider a company that can give short-term factoring. Which would be a short period of 1, 3 or 6 months. Therefore, it is also beneficial to consider the length of contract that the factoring company is offering.

Will there be lots of paperwork?
Paperwork is a part of a business and there is no way around it. Paperwork such as audits and provisions are always necessary. But keep in mind that the sales ledger is what the factoring company will be interested in. There will also be legal documents, which will need to be prepared correctly and read intensively. Therefore, it would be good practise to ask your invoice factoring provider to send you the documents in advance. Allowing you the time to look over them.

Most of all, ensure you know what it is that you want from the provider. If you would like to discuss this further then please contact us. We are happy to help!