The onus therefore, must lie with the business owner who seeks to rely upon such services, and so this article is intended to provide a brief overview as to the various issues you should be aware of in regards to choosing the best possible factoring company for you.
What then, are the signs of the best factoring companies?
Recourse versus non-recourse
The best factoring companies are those that offer non-recourse procedures. In case you are not familiar with this, this is whereby in the event that the factoring company is unable to recover the full balance owed on the accounts that are outstanding from a customer then they will simply take the money from the company that hired them in the first instance.
Because there is no predicting when and what customers will default on their accounts this means that if the company suffers from a high percentage of bad debt and defaults by customers all at the same time, then they will find themselves in an especially vulnerable position.
The best factoring companies reward loyalty
Given the long term nature of factoring agencies, as well as the high volume of sales that will be typically involved in the process, this means that in an attempt to secure the long term and repeat custom of the hiring company, many of the factoring agencies will provide discounts and concessions for bulk orders.
Therefore, make sure that the factoring agency you decide to use does indeed provide such a service, and furthermore, that you shop around and compare different companies to ensure that you choose the service provider that will give you the most generous return on your services.
What are the fees charged?
It is essential that the business owner also takes the time to carefully review and weigh the fees that will be ultimately levied for using the factoring company, as this will directly determine the level of profits that they are ultimately able to enjoy and earn in the long term. Obviously, the more flexible the factoring company is with the prices that they charge, then the more potential profits that the hiring company will be able to enjoy.
Don't just base your decision solely on the price charged on paper, you need to consider other pertinent issues as well such as penalty clauses that the company may impose, alongside the rates of interest that they charge on money that they are owed. What about the amount of money they will forward upon the receipt of invoices?
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