Factoring companies provide financing to businesses with cash flow needs. Invoice factoring is a type of financing, where a business sells its open accounts receivables to a factoring company, in exchange for immediate cash. Businesses use factoring to get faster access to cash, instead waiting 30, 60, or 90 days for payment from their customers.
Factoring companies serve businesses in a variety of industries. Here are some of the types of situations common at a factoring company:
There are factoring companies throughout the United States and Canada. Finding the right fit for your business can seem like an overwhelming task. Here are the primary kinds of factoring companies.
There are two categories of factoring companies: specialists and generalists. Specialists typically factor invoices for a specific industry, whereas generalists providing financing to companies in a wide variety of industries.
Factoring companies can also be either recourse or non-recourse. Most factoring companies are recourse factors. Here’s how they differ:
There are many kinds of factoring companies, each with its own special way. But generally, we all follow a similar process to get you the fast funding you need. Here’s how it works:
As we said, the process and requirements vary based on what kind of company you partner with, with many factors providing niche financing. Continue on to learn more about what you need to know when it gets to the nitty-gritty for all types of factoring companies.
You are approved for factoring based on the creditworthiness of your customers. But you need to know what your financing needs are. For example, are you expecting to grow over the next year, or are you looking for short-term financing? Being transparent with your factoring company about your business volume and financing needs is crucial, because these will determine your factoring rate.
When you are at the signing table, you must read the fine print and ask questions to get clarification of what it will cost if you are unable to meet your obligations. You want to avoid these costs and sign up for a program that fits your business. The penalties for not meeting your volume obligations can in some cases be crushing. Sometimes speaking with an attorney might be the best choice if you are uncomfortable because of certain language.
At TCI Business Capital, not only do we walk our clients through the agreement page by page to answer questions, but we provide our clients the option of a monthly contract that adjusts based on business volume month over month, ensuring that they have just the right amount of financing to help you avoid extra, unwanted fees.
The next consideration is the type of support your factoring company can provide. Take a hard look at your resources to determine how your company could benefit from value-added services that some companies provide. For example, could you use an additional collector? Does your accounting department look more like an empty desk without a chair?
Filling supportive functions can be difficult for small businesses or start-ups, especially when resources are tight. For some established businesses, taking advantage of the credit checks a factoring company could provide can reduce costs and assist the bidding process.
At TCI Business Capital, we provide a full suite of back-office support functions to all of our clients to ensure that together we position our customers for success, and build a strong partnership along the way.
Know what your financing needs are and be transparent. A good factoring company wants to fit you into a financing program that makes sense for your business, not one that will shut your doors if you don’t meet business volume. A factoring company that wants a successful partnership with you wants you to be open about what your business needs are. Perhaps in the discussion you might find out that there is a better fit somewhere else.
Lastly, when you are researching factoring companies, take a look at their online presence and find out what their customers are saying in reviews and ratings. It could help you to learn more about the services and experience.
At TCI Business Capital, we pride ourselves on distinguishing from the competition through our superior service and support. Here are just a few of the benefits of partnering with TCI Business Capital for your business finance needs.
Since 1994, TCI Business Capital has provided cash to successful and growing businesses across the United States and Canada. Get the cash you need today, instead of waiting 30, 60 or even 90 days for customer payments. TCI Business Capital offers same-day advances and competitive factoring rates. TCI Business Capital has more than 20 years of experience serving companies in a variety of situations. Our flexibility, experience and get-it-done culture allow us to help almost any business.