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How to compare factoring companies
19 May 2020

There are 1000’s of companies across the country that have moved to invoice factoring for their factoring needs. Before picking a company, businesses tend to focus on advantage rates and factoring fees. However, with all the fine print details, it’s not always easy for transportation companies to decide which factor will cater to their specific needs.

Here are some key parts to consider before signing a contract. 

Factoring advance rates

Dollars and cents are usually the first aspects that a business is interested in when it comes to picking a suitable factor. The advance rate and factoring fees are what determine how much money is advanced upfront. 

In order to know what is best for your company, you should figure out your possible payment scenarios and the total fees charged by each factor. For example, if you factor $80,000 in invoices, what percentage comes out in fees? 

As a general rule, factors give about 75 to 90 percent of the invoice value upfront! Application fees are also something to consider. 

Factoring services

Factors offer a range of other services to add value to for their clients. These value-added services are what separate factoring companies from each other.  Some additional services include:

  • Same day funding
  • Electronic invoice option
  • Online reporting
  • Collections 

Be sure to find out if your prospective factor offers some or all of these benefits. 

Invoice management

The next sector you want to understand is how factors deal with unpaid invoices. Will the factor take the risk and provide credit protection, or will the customer go out of business? Is this a non-recourse or recourse factoring agreement? 

Renewal fee

These are annual fees that some factoring agents charge. 

Invoice copy fee

Some companies charge a fee to just copy your own invoice. This should be avoided as it is probably an indication of other hidden fees. 

Speaking of hidden fees, here are some others to be aware of:

  • Arrangement fee
  • Retrospective fee
  • Refactoring fee
  • Extended service fee
  • Audit fee
  • Trust account fee

Required minimums

It is not uncommon to encounter factoring companies that require a minimum dollar amount for each invoice before they agree to factor your accounts receivables. Other required minimums show up in contract lengths. You want to be careful about this because there are fees attached to leaving a contract early. 

Minimums are not always harmful, but it is important to understand them before signing an agreement. Don’t get stuck needlessly paying more than you originally planned.  

With all that being said, make sure to review all aspects of a factoring agreement before choosing what is best for you. If you’re interested in learning more about Instapay, contact us here.

InstaPay
19 May 2020
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