There is no doubt that invoice factoring has become a convenient way for businesses to get fast payments and keep cash-flow consistent. For companies and startups experiencing significant changes and rapid growth, accessing quick funds is necessary to keep up operations. To avoid business failures and cash-flow issues, companies turn to accounts receivable factoring as a reliable solution. 

Reputable companies like Porter Capital have made factoring unpaid invoices an easy and smooth process. Invoice financing companies buy unpaid invoices and pay up to around 95% of the invoice value to their clients upfront. They then collect directly from the customers at the end of the payment term. Not all factoring companies provide the same benefits, customer service, or additional services with their factoring agreements. It is essential to know what you’re looking for when choosing an invoice factoring company to work with. This article outlines five important considerations when choosing an invoice factoring company.

There are plenty of invoice financing companies, offering a variety of financial benefits to the businesses. Choosing the right one requires you to consider aspects like pricing, stability, flexibility, payment time, and reviews.

1. Pricing – Transparent Fees & Rates

Factoring rates are one of the more essential aspects to consider when choosing an invoice factoring company. It is necessary to do some homework before making the final decision to avoid getting into a long-term contract with hidden fees, such as additional administrative costs when the funding cycle ends. Overall, several things may affect the factoring fee. Additional fees may include monthly average purchase volume, number of customers aka account debtors, contractual commitment, and the amount of sold invoices. Even a slight variation in any of these things may lead to a substantial change in the invoice factoring company’s fee structure.

2. Stability

Working with a stable invoice financing company is important when it comes to helping your business grow. You need to work with a company with a reliable and robust track record in the finance industry. Knowing you partner with a stable invoice financing company provides you with confidence that your business will be taken care of. One way to ensure that you are signing with a reliable factoring firm is to choose one affiliated with the IFA (International Factoring Association). IFA members adhere to stringent policies, business ethics, and practices. Porter Capital is a member of the IFA, along with several other associations and accreditations. Porter has been in business since 1991 and has a stellar reputation in the financial world.

3. Flexibility

The third important thing to consider when picking a factoring company is the flexibility it offers clients. It is essential to inquire about the following things when choosing an invoice financing company.

  • Are there contract options available, or what is the specific time length a business needs to remain in contract with the financing company?

  • Is there a personal guarantee a business is required to sign that makes the business owner responsible for unpaid invoices, aka recourse factoring?

  • Does a company have to sell all their invoices?

  • What is the minimum amount of invoices a business needs to factor? If so, are there any penalties if a company is not able to meet the requirements?

  • Does the invoice financing company offer additional factoring services?

4. Payment times

Most businesses, especially small businesses, use invoice factoring to speed up their payment times. Instead of waiting for a customer to pay them at the end of the payment term that could be up to 90 days, an invoice factoring company can advance them the funds in as little as 24 hours. This deposit speed can help protect your business’s revenue stream and ensure you have the capital you need to complete projects and grow. Not all invoice financing companies offer 24-hour pay and some charge additional fees for faster payment terms, so it is important to know what each factoring company provides.

5. Reviews

A client review can go a long way. Looking at client reviews of the invoice financing companies you’re interested in can help a lot in this process. Porter Capital operates an easy to use website that lets customers know the critical information they’re looking for when researching factoring companies. Porter is transparent. They disclose their fees and discount rate ranges, as well as provide details of their qualifying standards. They are also on the list of best invoice factoring companies of 2020.

In a nutshell, invoice factoring is an excellent financial source for businesses to get access to their working capital for daily operations. Contact Porter Capital today to see how we can help your business get consistent cash flow and grow your business. Get a free quote here.