How to Avoid Issues & Problems with Accounts Receivables Factoring
The familiar saying “read the fine print” is true with just about anything in life involving money, and invoice factoring is no exception.
Though business invoice factoring is a hundred-year-old practice and the most popular ways to loan money in Europe, it is still less familiar in the US. This lack of awareness and shady behavior by a minority of invoice factoring companies has led some business owners to be skeptical about the validity of factoring account receivables for their company.
Because business invoice factoring has grown rapidly in the past number of years due to the recession, sadly there are scammers out there looking to take advantage of people and companies that are struggling to pay their bills.
So if you are looking at business factoring as an option for your company, here are some things to look out for so you can avoid Factoring Receivables pitfalls and problems.
Know Exactly What Fees You’ll Pay with Invoice Factoring
Reputable invoice factoring companies will let you know in advance and in writing the amount of money – the fee or percentage – they will charge for buying your invoice. Though it may vary by company, an invoice factoring company generally should pay money equaling 90-99% of the invoice or about 96% on average.
Banks and other lending institutions may charge you additional closing costs, origination fees, and interest so make sure you flesh out the total costs upfront. Anything more than 10 percent should signal something is amiss. In addition, the company should spell out in simple, easy to understand terms the amount of the fee or percentage.
Trustworthy Factoring Services Tell You When You Can Have Your Money
The benefits of Factoring Services are that you can get your money right away in most cases. You don’t have to fill out a lot of paperwork or worry about your credit score or business history. In most cases you should know whether you’re approved for the money within 24 hours.
Invoice Factoring Companies that promise to “be fast” but don’t specify exactly when you will be approved or disapproved for your money might be viewed as suspect. After all, the term “fast” is highly subjective. As a factoring services customer, you have the right to demand to know exactly how long your application will take and what is involved in that process. A company that is reluctant to tell you this information or that only provides vague terms, is probably one you want to avoid.
At BusinessFactors.com, our reputable agents are familiar with the fraudulent practices that exist in today’s market. As a result, we always provide details of when you will get your money and exactly what we charge so there are no surprises. We’ve been handling accounts receivables factoring for 40 years, and are happy to answer any questions you might have regarding Factoring Receivables.