Selecting the right factoring company for your business is a challenge. It is important to consider several items when evaluating different factoring companies.
Before going into the details on what to consider, it’s essential to understand what a factoring company does and why businesses use factoring companies.
Invoice factoring is a financing service provided by factoring companies. Invoice factoring works by selling your open invoices to a factoring company in exchange for immediate cash.
Businesses choose to work with factoring companies for a variety of reasons, but the most common denominator is the need for consistent cash flow. Factoring companies eliminate the wait and wondering of when you’ll get paid by paying you immediate cash on your invoices.
Companies use factoring when they are unable to get traditional bank financing. Approval for invoice factoring is based on your customers’ credit strength rather than your company’s, making it ideal for start-ups and companies with financial challenges.
Invoice Factoring With TCI Business Capital
|√ Same-Day Funding||− Funding in 1-2 Months|
|√ Qualify Based on Your Customer’s Credit||− Qualify Based on the Credit of Your Business|
|√ Simple Setup & Application Process||− 1-2 Month Application Process|
|√ Invoices Serve as Collateral||− Inventory, Equipment, & Assets Serve as Collateral|
|√ Free Credit Reports on Customers & Potential Customers||− No Credit Services|
It is important to make sure that your factoring company has experience and is credible. Find out how long they have been in business. Do an online search to find reviews. Remember, most every company will have some negative reviews. It is more important to make sure that there are more positive than negative ones. If there are negative reviews, take a look to see how the factoring company responded to the situation, or if they did at all.
Many factoring companies offer additional services that can help your business focus on other objectives. See if your potential factor provides other services that could help save your business time or money. Such services might include credit analysis, risk management, and accounts receivable management.
As mentioned above, experience is critical to ensure you’ll get prompt payment. A factoring company that has experience in your specific industry is even better. With experience in your industry, the factoring company understands the nature of your work, knows many of the invoicing requirements, and has probably worked with many of your customers and potential customers.
There are two types of factoring: recourse and non-recourse. While both provide your company with immediate working capital, there are a few differences.
Recourse Factoring: This is the most common type of program, offered by the majority of factoring companies. With recourse factoring, the factoring company has the right to sell an invoice back to you if your customer does not make payment within the amount of time stated in the contract.
Non-Recourse Factoring: The factoring company takes on the financial risks of collection of invoices, even when payment extends beyond the standard terms. It’s important to read the fine print with non-recourse factoring as many of your invoices can still be excluded.
For most companies, recourse factoring is the right option as the factoring fees tend to be much lower than with non-recourse factoring. Plus, the credit standards applied to your customers are not as stringent.
The advance rate is the percentage of the invoice total that you receive when the invoice is advanced on by the factoring company. This rate varies for a variety of reasons including your industry, invoicing volume, and your customer’s pay trends. The standard advance rates for most industries is 80 – 90 percent.
A factoring company charges a fee for their service. This factoring fee is based on how long it takes each invoice to be paid by your customer. Some factoring companies will charge additional fees for other services. Be sure to read your contract in detail to make sure you know how much factoring will cost.
Contracts can be as short as a one-time deal, also known as spot factoring, or as long as a two-year agreement, or even more. Before signing an agreement, make sure to consider the length of your contract and to see if there are any penalties for ending it early.
Typically when you choose a factoring company, you are contracted to send a specific monthly volume of invoices. As your business changes, your invoicing volume can go up or down. It is a good idea to talk with your potential factoring company to understand what happens if your monthly volume changes.
TCI Business Capital has been funding businesses since 1994. We serve companies in a variety of industries, from start-ups to well-established firms. Our online reviews display our credibility, superior customer-service, and get-it-done culture.
As part of our invoice factoring programs, we offer value-added services to our clients at no additional charge. Some of these services include:
We have more than 20 years of experience in a wide-range of industries including:
While most of our customers prefer our recourse factoring programs, we do offer both programs depending on your needs. Talk with one of our financial representatives to see which option works best for your company.
We offer competitive advance rates on your invoices. Once we receive an invoice, you’ll receive same-day funding.
Our low factoring rates are outlined in your contract.
We offer month-to-month contracts. We want to keep clients here because they want to be, not because they have to be.
Because we offer month-to-month agreements, we can change your volume based on your business needs. We automatically lower your factoring fees as your volume increases. Since the contracts can be month-to-month, it allows you to avoid any volume deficiency fees that could occur with other factoring companies. Our monthly programs start at a minimum of $50,000 in invoicing volume.
|BlueVine||TCI Business Capital||Paragon Financial|
AR Specialists (Collections)
Dedicated Account Manager
|No Industry Specialties||Oilfield
Utility & Pipeline
Recourse vs. Non-Recourse
|Spot Factoring||Month-to-Month||Contract & Spot Factoring|
Monthly Volume Commitments