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5 Tips for Choosing the Right Factoring Services

If you are running a small business, you’ve probably found yourself in a frustrating, but very common situation. You may find that your business is running low on cash. Your customers could owe you plenty of money for your goods or services, but without cash on hand you will have cash flow problems. Collecting on outstanding invoices in a timely manner can be a frustrating process. If you are thinking about taking out a loan or cash advance, you may have heard of factoring companies that provide these types of services. Choosing the right financing broker to help your business can be difficult. There are literally thousands of options available in most areas of the country. This article tells you what to consider when choosing the right factoring service in Kennesaw, GA, to meet the needs of your business.

How Does Factoring Work?

First, choose a factoring company in Kennesaw, GA, that can provide multiple options to meet your needs. Invoice financing, or factoring, allows a business owner to sell outstanding invoices to a company in exchange for immediate cash. This cash flow injection can help fund the day-to-day operation of your business for various other expenses. You want to ensure you pick a company with multiple options, as well as a company that has lots of experience.

Types of factoring loans include: loans where your business assumes the risk of invoices not being paid by your customer, loans where the factoring company assumes the risk so that your business is protected, and one-time loans for very specific situations. You should familiarize yourself with factoring terms like: recourse, non-recourse, over-advance, and NOA. Second, as there are so many options available, you should probably talk to multiple companies to determine which will meet the needs of your business best. The factoring company with the lowest offer may charge more than the others in unexpected fees or hidden costs.

Other Points to Consider When Choosing the Right Factoring Services

Make sure you receive a written proposal from the factoring company that you decide to go with, and make sure that you read the fine print. It is important to understand what fees may be incurred by your company due to late payments, interest, or other penalties built directly into the agreement. The factoring company with the lowest offer may charge more than the others in unexpected fees or hidden costs. There may also be other terms or conditions that limit your flexibility to pay the debt back or unnecessary terms that may make the agreement unacceptable. Finally, consider quality customer service. Work with a company that will be accessible and pleasant to deal with.

How to Choose the Right Factoring Services:

  1. Communicate your needs clearly
  2. Only sign a contract after carefully reading and understanding the language
  3. Be sure funding deadlines make sense for your business
  4. Will you be able to reach a decision-maker if you run into service issues?
  5. Do they specialize in your industry?

It may seem like common sense, but financing agreements can be complicated. Legal jargon makes it hard for the average small business owner to understand the specifics. If there are conditions in your agreement that you did not previously discuss with the factoring company, this can be a red flag. Be sure to understand exactly what hidden costs or penalties may be built into the agreement.

Communicate your needs clearly, so the factoring company has the best chance to solve your cash flow problems. Don’t try to hide anything from the underwriting team. This can eventually come back to bite you. Instead, lay out what kind of financing you need to grow. Then, the factoring company can help you achieve that growth.

Does the Factoring Service Make Sense?

Factoring services are mostly alike, but you need to be choosing the right factoring service for you! Factoring services will vary on credit limits, same-day funding deadlines, costs of funding, and debtor approvals. Will you want a recourse or non-recourse facility? Ultimately, the right factoring service will be able to work flexibly with your business needs in order to help you grow. You don’t want more trouble than it’s worth. If you have specific industry challenges, partner with a factor that specializes in your industry sector.