Once you have decided to use factoring as a way to increase the cash flow for your business, you have to decide which factoring company is right for you. The first thing to look for in a factoring company is that they have experience working with companies in your industry. Once you have narrowed the search down to factoring companies who specialize in your industry you must consider the terms they outline in their contracts. Here are a few contract terms to avoid to save your business time and money.
Monthly minimums and penalties for non-usage
If you want to retain control of your cash flow, you should consider a factoring company who does not require you to factor a certain amount of invoices every month.
There are several fees some factoring companies will charge upfront just to get you started including an application fee, processing fee or setup fee. If you don’t want to feel nickel and dimed, and work with a partner who is transparent, look for a factoring company with no upfront fees.
If you want a factoring company who wants to earn your business with every transaction and not make you feel like your hands are tied then look for one who offers no termination fees. This means that once the factoring company is paid off in full they do not charge you any fees to terminate the agreement. You can simply just stop using the services.