Invoice Factoring Articles / Invoice Factoring Questions to Ask: Part 2 of 3
Invoice factoring options: ask these seven questions to find the receivables factoring firm with the best deal for your business: Part 2 of 3.
In part 1 you learned two very important questions to ask a factoring company. Now let’s get more detailed; here are a few more to ask to make sure you find the best factoring partner to grow your business.
Ask the following questions of your prospective factoring companies:
3. If an invoice factoring company offers you a “flat fee rate”, ask about the implications and make the right choice for your business.
While flat fees may seem less complicated, the end cost can be substantially higher. With a flat-rate fee, the cost is the same whether the receivable is out for 10 or 60 days so, unless most receivables are out 45-60 days, the overall cost makes this type of rate more expensive.
4. Ask an invoice factoring company these questions about contract terms to avoid costly termination fees:
- Is there a contract term?
- How long would my contract term last?
- Is there anearly termination fee?
- Is my contract automatically renewed if I don’t cancel in writing?
- If so, how much advance notice to cancel do you require?
5. Not all receivables factoring companies are alike: ask potential partners if they work with all clients.
Some receivables factoring companies will not fund companies with a high concentration, i.e., if their business is dependent upon one or two clients. Other companies do consider clients with concentration and they usually examine risk levels to determine a rate.
Learn more about how accounts receivable factoring works: make the best decision for your business.
Read “Find the best factoring company for your business: how to read an invoice factoring contract like a pro. (Part three).” Find out what to ask about specific fees charged so that you can find the right factoring firm for your business. Then talk with firms who offer factoring loans and get growing!
