7 Questions to Consider When Switching Factoring Companies

September 26, 2018

You might be considering switching factoring companies because of poor customer service, lower rates with an alternate factoring company or your needs aren’t being met somehow. Whatever the reason might be, you want to make the switch, but you have so many questions piling up that it may seem more complex than it’s worth. However, we are here to help get those questions answered for you! It is simpler than you think to make the switch!

7 Questions to Consider When Switching Factoring Companies

1. How do I get out of my factoring contract?

You signed an agreement with a factoring company, and now you want to get out of it. Where do you start? There are two things you want to check right away; the expiration date of your existing contract and any early termination fees that may occur. Be sure to read it over carefully to make sure you don’t miss any hidden fees or terms.

If you’re ready to make the switch to Scale Funding, we can help look over your existing contract, so you’re ready to make the switch.

2. How do I choose a new factoring company?

When choosing a new factoring company, there are many things you should consider, but most importantly, make sure it will meet your business needs.

Some of the other items you should consider include:

• Experience
• Credibility
• Back-Office Support
• Industry Expertise
• Recourse or Non-Recourse
• Accounts Setup Speed
• Funding Frequency
• Advance Rates
• Fees
• Length of Contract
• Ability to Grow

How to Choose the Best Factor

3. How does the buyout process work when switching factoring companies?

The buyout process is often referred to as a refinance as it is similar to refinancing your home. Simply put, all invoices currently open with your existing factoring company will be switched over to your new factoring company on the day of your buyout.

Buyout Example:

If you have $500,000 open on your accounts receivables and your advance rate is at 90 percent, your buyout should be in the neighborhood of $450,000, depending on how your factoring company treats its reserves.

In this case, if your advance rate was 90 percent with us, we would wire you existing factoring company $450,000, and then we would instruct your customers to remit payment back to your new factoring company.

4. Do I need to tell my customers I’m switching factoring companies?

No. When switching factoring companies, both the current factor and your new factor will inform your customers of the change. In order to make the process go smoother, you should update your invoices with the remit to address of your new factoring company, once you send your invoices to be funded.

5. Will my new factoring company help me with the transition?

Yes! Scale Funding has more than 20 years of experience helping customers switch factoring companies. We are happy to review your current contract to make sure you are aware of any early termination fees and terms. We will work with your existing factoring company to make the buyout process as quick and simple for you as possible.

6. Will I be without financing for a period of time?

In most cases, no. The goal is to have a smooth transition, with no disruption to your funding schedule. Your new factoring company will work closely with you to make sure the buyout occurs without interrupting your funding schedule. At Scale Funding, we will schedule the buyout based on your input and needs.

7. Will switching factoring companies cost me money?

Possibly. Depending on your existing contract, there might be early termination fees. However, if you find a new factoring company with lower rates and better customer service, the money it costs you up front can be worth making the switch.

Is it Time to Switch to Scale Funding?

If you’re looking for a new factoring company with years of experience, superior customer service, low rates, same-day funding, and free back-office support, start factoring with Scale Funding.

To learn more about switching to Scale Funding, fill out the form below.