Accounts receivable factoring companies are able to qualify you for funding even if you have been turned down for a bank loan, and they offer faster turnaround times than other financial institutions. While most factoring businesses can provide fast funding, choosing the right firm to factor your invoices is still an important decision that you need to carefully consider. Here are three things to learn about a factoring company before signing a contract.
1. Learn How the Business Determines Factoring Rates
Factoring your open receivables is not a complicated transaction. Working with a factoring company will be much faster and easier than working with a traditional lender. Some factoring companies will offer different rates for different customers in your portfolio. For example they may offer a low rate for well-known debtors like Costco, Walmart, CVS and adjust to a higher rate for lesser known or more local debtor who is unknown to the factor. The same goes for advance rates; they may give you an 85% advance on a Costco invoice due to you but only pay 70% for a local company who they are less familiar with. At Universal Funding we will propose one factoring rate and one advance rate for your entire portfolio, so there are no questions about how much you will be advanced on an invoice and how much it will cost you.
2. Learn What You Need to Apply
The application process for accounts receivable financing should be simple and clear. The application itself should be shorter than a bank loan application. Make sure that the factoring company is asking only for records you can easily provide, such as your accounting records and invoices. The application process at Universal Funding looks like this:
- You submit a one-page application, your business registration information, and information about your receivables and debtors.
- Our in-house underwriting department performs a quick examination of your business and your customer credit and makes an approval decision, usually within a few days.
- You receive funding within hours of approval and verification of the invoices submitted.
Factoring companies provide you with funding by purchasing your open receivables for a discount. You should understand the variables the factoring company uses to determine the discount on your invoices. You should never work with a company that is not transparent about their methods, leaving you with incorrect expectations about your qualification or funding amount. When you factor with Universal Funding you will have online access to view your account at any time.
3. Learn How the Business Handles Your Customers
Once you receive funding, you are not in debt to the factoring company. The company collects repayment from your customers. Find out how the company communicates and collects payment from your customers. If there is no set policy in place, or if an existing policy is not considerate of your customers, find a different company. Universal Funding protects your relationship with your customers. We honor the terms you have set-up with them and send out bi-monthly invoices.
Your Questions Answered Quickly
Whether your business is thriving and you can’t keep up, or you are waiting on clients to pay their invoices, Universal Funding can help your growing company. Call us at 844.334.1856 or complete our rate form today to learn more about invoice factoring and how it can improve your company’s cash flow.
About Universal Funding
Universal Funding is a private funding source that has funded thousands of businesses and more than $2 billion since 1998. We turn your accounts receivable into the funding you need through invoice factoring and can have capital in your hands in a matter of days.