Factors – Factors – and more factors: Right? But how do you choose the right factoring company for working capital for small business needs and not get into an agreement that works against you instead of for you?
What should you ask about?
- How much they’ll advance you on your invoices?
- Are they private, boutique, or a national presence?
- Are they promising you more than they will or can deliver?
Stop right there and read the following:
- Pricing and how much factoring actually costs are not always related
- Availability and how much they say they’ll advance … are not related
- How big they are means little BUT the bigger they are usually the less flexilibilty they’ll allow
- Promises and what is written in the contract are two different horses so don’t fall for that one
Some questions you do need to ask:
- What is the factor’s credit criteria i.e. what invoices will they actually buy?
- Regarding the advance: All factors say they will “advance UP TO” a percentage of the invoice … ask and get that explained!
- Regarding their size and policies: Are they flexible or strictly ‘by the book’ with their contracts?
- If they promise flexibility get it in writing … don’t find out the hard way that this was just a sales pitch!
When I factored several of my businesses before and after I got into the business itself I asked for, and alwasy provide, a heart to heart conversation about how in my case, me, and in this case, you, would become bankable.
Face it: You probably don’t want to be factoring forever so what is the prognosis and path forward to achieve bankability? Make sure the factor or source you use discusses this with you because it’s important to your business.
To help you we provide “Ten Questions You Should Ask About Factoring” on our website with no strings attached. We believe information and education are key to people trusting our services and that when they are ready to act they’ll remember us.
That said: If you have any questions please post them and we’ll do our best to promptly answer them!
Yours in business,
Ernie Brown @ www.businessfundingnortheast.com or email me @ firstname.lastname@example.org