Invoice Factoring Articles / Selecting the Right Factoring Company
When securing business funding via factoring loans, are rates the only issue to consider?
This is a very important question for any company considering accounts receivable factoring or receivable factoring. Many new businesses and rapidly growing established companies have found that accounts receivable factoring is a vital part of their business planning. Banks are unwilling or unable to meet the cash-flow demands of these companies so they pursue factoring to facilitate their growth. So the question becomes: how do you balance the cost of receivable factoring with the other issues involved in choosing a factoring company? In other words, should cost be the sole reason when choosing among factoring companies?
The answer is Yes and No.
Yes, any business owner who does not spend the time to track and understand the revenue, and the expenses in their business will not survive. So in terms of profits and losses, the actual cost involved in getting accounts receivable factoring is very important. So ask the question:
- How much is receivable factoring going to cost you?
However, do not make this the only question you ask prospective factoring companies.
Consider that getting the best value in accounts receivable factoring isn’t just about the price.
While price is an important element in your decision, any factoring company can sell you the lowest price. What you should be looking for is the best value for your factoring loans at a competitive price.
If the low cost for your receivable factoring seems too good to be true...
It has become commonplace for some factoring companies to offer very attractive rates and advance rates to entice prospective clients. Factoring companies know that many busy executives will not look beyond the rates to understand the real costs involved in receivable factoring. “They offered us … can you match it?” is a common refrain. However, the key to finding the right factoring company is to remember that anyone can sell on price, but the lowest rate for factoring loans in many instances is too good to be true.
