A small business owner spends a lot of time in researching companies and financial institutes to partner with in their work. The same should be true with the factoring company selected.
Unfortunately, too many small business owners don’t compare the options or the features offered by different accounts receivable companies. This may result in choosing a factor that charges a higher factoring fee or rate. It may also include choosing what looks like a very low factoring rate only to find there are hidden fees that drive the costs of the service much higher.
To get started in sorting through the different accounts receivable companies to find the best match for your small business, consider the following important steps.
Do Your Research
Think of the top accounts receivable companies as you would any highly successful business. These are not companies that are spending a lot of time on cold calls and blanket marketing. Instead, they have a steady customer base of companies in specific industries where the factor is able to provide customized services for a great match.
It is also important to research the types of company the prospective factor works with. Choosing a factor that focuses on working with small businesses with revenue streams similar to yours is always ideal.
Have a Personal Meeting
Whether it is in person or by phone, it will be critical to discuss your needs and the factor’s services to decide if it is a good match. The factor will determine the amount that is funded and the held amount as well as the fees for factoring based on several elements.
Additionally, you will want to confirm the fees you will be charged. Some of the less reputable factors charge a large number of fees that are not disclosed up front. These can really impact the cost of the service for any small business.
It will also be important to know if the factor requires minimum volumes of transactions per month or quarter. While these volumes will help to keep the cost of the service very low, there will be financial costs if you don’t meet the minimums, which is often a difficult task for a small business.
