Considerations for the Best Accounts Receivable Financing Company

Your inability to choose the best accounts receivable factoring company for your business can significantly impact your profitability in the long term. The key to success with accounts receivable financing is to select the right business partner to work with.

Take your time, shop around and benchmark the various companies against each other to pick the best partner for you. While you shop around, remember that accounts receivable factoring cost and rates care vary widely between one factoring company to another, but there is a lot more to choosing the right accounts receivable factoring company than just the cost.

Your screening procedures are going to be critical in determining how successful you can execute accounts receivable factoring.

Longevity and Industry Experience

The longer the accounts receivable financing company has been in business, the more information you can find on them.

It is usually better to go with a company that is well established, has stood the test of time and one that has expertise in the specific industry your business is in.

With the amount of complexity and nuances involved in various industries, teaming up with a partner who understands what you do will usually turn out better for your business.

Ask the accounts receivable factoring company you are evaluating if they have a client similar to you in their portfolio.

If you are a retail business, ask if they have other retail clients. Industry experience is a key factor in determining your success with factoring.

Conducting Due Diligence

When conducting due diligence, or your independent research, consider contacting the Better Business Bureau (BBB) and see whether the company has any complaints, the nature of the complaints, and what it did to resolve them. Contact your local Attorney General’s office to learn whether there are complaints against the company.

Ask the accounts receivable financing company for a copy of the notification they send to your customers and read it for tone and reasonability of language. It is also not uncommon to ask to tune into the collection calls they make to your customers.

Customer Service Considerations

Customer service is the back bone of any business. Take your time to evaluate the customer service of the financing company you are considering.

Can you only reach them from 9 to 5, or are they available outside normal business hours? This is especially important if your business operates outside normal working hours.

Understand how their customer service style can impact your business’ customers. In other words, is your reputation at risk because of say aggressive collection tactics?

Do not risk losing your customers. Your customers deliver revenues, which is what you factor. Without the customer, you won’t have anything to factor!

Reference Checks

The last, but certainly not the least factor in evaluating the best accounts receivable factoring company to work with is conducting reference checks. Do not be shy to ask for references.

A good company will not hesitate to provide you with businesses that they work with either.

Some questions to consider asking references are the following:

What is the customer service like? How long do they generally take to respond?
How long do you wait for initial funding? How long does it take to receive the remaining?
Have your customers complained about the factoring company?
What was the application process like? How was your experience?
Do you receive the adequate attention and support you require?
How long does it take to get the funding request approved?
Any surprises in forms of additional fees, costs, terms and conditions?
Would you use the company again if you had to do it over again?

Conduct reference checks is probably the single best determinant that will tell you whether you should work with the factoring company. There are many accounts receivable financing companies out there today. If one doesn’t work out, move on to the next.