4 Questions to Ask Your Factoring Company

Many companies use factoring to help with cash flow, but it’s important that you choose the right establishment to partner with. Ask these four questions to find the top factoring companies so you can assure you are working with one of the best.

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1: Have you worked with companies in my industry?

There are many different industries that can benefit from accounts receivable financing or factoring, but you will likely experience the best service and attention from a company that has worked with others in your industry before. That way they can structure the contracts and terms to fit your needs. If they specialize in your industry, chances are they’ve already processed your customers as debtors.

2: Can you explain the fees?

As with any loan or line of credit, factoring means selling your invoices at a discounted rate. The difference between your total invoice amount and the cash you get are the fees you pay to the factoring company. The fees may vary depending on your total contract commitment, purchase volumes, the size of invoices, or credit quality of your customers. Other fees might include costs to check customers’ credit or legal fees. Be sure you get a full explanation of the fees in advance so you know what to expect. We have a comparison chart that identifies where other funding companies nickel and dime through extraneous fees.

3: How long have you been providing factoring services?

It’s best to work with companies that have a reliable track record in providing factoring for companies in your industry. Both longevity and ethics are important to ensure you get quality service for as long as you want to continue working together. Universal Funding was established in 1998 by principals who were considered leaders in the factoring industry.

4: What are the terms and conditions of working with you on factoring?

Not all factoring companies are the same, and they may have different requirements or contract lengths. It’s important to understand all of the expectations before you enter into a contract so you won’t find any surprises later, including:

  • Length of time that your contract specifies you must continue working with the factoring company
  • Any penalties (if applicable) should you decide to terminate the contract sooner
  • Any minimum requirements for how many invoices, what percentage of your total invoices, or total dollar amounts you have to sell
  • Maximum funding that the company can provide

Contact Universal Funding today to find out more about our services. Simply fill out our online rate form or give us a call to discuss all your questions.

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