What are the most valuable services provided by the best factoring companies?

by | Apr 9, 2015 | Financial Advisor

Your business is your pride and joy, and you’ve worked hard to get it where it is today. But what happens when you need a bit of financial assistance and working capital? Your business can only grow if you can keep adding inventory and cover the cost of expansion, but for some businesses this is not always easy. I bet your first thought was applying for a loan at a bank, right? Well, you might want to rethink this. Not only does it involve large amounts of paperwork can take up a lot of your valuable time, it may also come with some large fees, hidden costs, and may put your business into debt which can do more harm than good in the long run. Instead, so some research on invoice factoring.

Do your homework

Many business owners have not heard of factoring, or those that have heard of it may not have used it yet. Factoring is, quite simply, a way to increase your working capital by selling your commercial Accounts Receivables or invoices to a second party at a small discount. Does it work for all businesses? No. Only you can decide what will work best for your financial situation when it comes to your business.  Factoring is not a good fit for every business. Before you decide to take the plunge into factoring, take the time to do some research on the process and the companies that offer this service. Do they have a long standing client list with well-known corporations included? Are they willing to work with smaller businesses or just Fortune 500 companies? Are they openly answering your questions and providing you with information about their service?

Is this a loan?

Factoring is not a loan; it’s an advance on funds you would have received anyhow from invoices or Accounts Receivables. The best factoring firms offer a variety of services including investigating and monitoring the credit risk of your customers, they will assume the credit risk of customers if a default occurs, and they collect AR directly from your customers. In addition, they can account for and report all AR activities back to you, as well as provide assistance in disputes, adjustments or returns. If a firm is just offering funding and nothing else, you might want to look elsewhere as they may just be a broker and not a funder. For the safety of your business and financial state, go directly to the source – the funder.