One of the top challenges for business, especially small businesses is maintaining a consistent cash flow that can allow the business to thrive and expand. It is normally not on small business owners’ ability to control the collection of accounts receivables that create numerous cash flows.
One of the best things business owners can do to maintain cash flow is to factor their accounts receivable and turn them into instant cash that can be used to run the business. But if you don’t want to add more cash flow pressure on your business, then it is crucial to work with the right factoring company such as Miami Factoring. Here are some of the top things you should look for in a factoring company.
- Industry expertise
One of the crucial things you should look for in a factoring company is industry expertise. Remember that factoring companies come in various sizes and shapes. When looking for a factoring company, you need to find a factoring company that understands your business model and the industry in which you operate.
Working with such a company will ensure that everything runs smoothly. Of course, you wouldn’t want to spend your precious time explaining your daily business procedures to a factoring company that is not familiar with your company’s model. This is why it is still advisable to hire a factoring company that already knows your industry.
Another essential thing you need to look for in a factoring company is stability. It is important to secure funding from an established factoring company. Just like it is vital to work with an invoice factoring company that understands your business, it is also vital to work with a factoring company with good reputation.
One of the best ways to ascertain this is by working with a factoring company that is allied to the International Factoring Association [IFA]. Factoring companies that are affiliated with the IFA tend to comply with business practices and code of ethics. You can check on the IFA website for reliable and trustworthy factoring companies.
This is an important thing that you must look for in a factoring company. Don’t just rush into talking numbers before you understand what you are getting your business into. You need to understand how the company structures its fees. When the company advances money on receivables, it is basically making a legal purchase of your invoices at a discounted price. The rate can be a one-time flat fee. It can also vary depending on how long the factoring company will own the invoice.
The fees can vary depending on factors, such as contractual commitment, the average size of invoices sold, average monthly purchase volumes, etc. The company may also charge extra fees for their additional services, such as running credit and background checks on account debtors. So before you sign any contract with the factoring company, you need to understand their fees and determine if you are comfortable with the fees.