Keeping to a “New Year’s Resolution” of being ahead of the curve is a goal everyone needs to work towards…as a small business owner, don’t wait to the last minute to find the extra capital that you need. Keep this year’s resolution and find the right capital before its urgent. Finding the right factoring company is a great way to accomplish this task.
A factoring line or an accounts receivable line of credit is a simple way for businesses to turn their invoices in into cash to solve short term working capital needs. This is one of the common ways adopted by companies today to get more cash flow or working capital for carrying out their business activities.
What to Look for when Applying to a Factoring Company…
When applying for a new factoring invoice line of credit, the first item one should look for is the number of years that the factor has been in business. This is not a futile exercise…its important that one be aware of the factoring company representing that they have combined years of experience because this does not translate in to real history and track record as a factoring company for account receivable financing. One needs to see that factoring company has at least 10 years minimum in business and +20 years is even better. Plus 20 years in business says a lot about any business and even more about a lender if its reputation is solid without a ton of complaints (note that after so many years, one or two negative comments are typically meaningless, but if there are many complaints via the web or litigation issues on the public record then there is most likely a problem).
What to look for in Selecting a Factoring Company…
The most important item is to feel comfortable with the factoring company’s management as many factoring companies will have sales people that are completely disconnected from the actual day to day process, and more importantly these sales people add little value to your transaction because they have not typically been with the organization for long due to high turnover. Getting to know and meet the actual people that process the daily fundings will make a big difference… trust me. Best advice is to charm them and bring them a small gift of chocolates the first time you meet them…this has always worked in our factoring company.
Lastly, one should also review the factoring company’s area of expertise as it’s always best to find a factor with invoice factoring knowledge where your business needs it. For example, if you are an importer then having a factor company that knows about trade finance and letters of credit is very helpful where most generic factors would not have a clue.
Most importantly, taking a common sense approach to making a choice on selecting your factoring company is key to this process before just giving off your invoice factoring to any finance company. Remember, your accounts receivable and resulting payments are the heart of your company so you should have confidence in your financial partner.
By Stephen Perl, MBA, MS
CEO of 1st PMF Bancorp
