Receivables Factoring

Written by Linda Alexander
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How would you like to get paid for your invoices in advance through receivables factoring? Even with a percentage taken out of the cash, factoring could be right for your business. When you have the cash you need to tide you through seasonal shortfalls, your company can actually see revenues increase.

Choosing a Receivables Factoring Company

When you choose a company to handle your receivables factoring, there are several things to take into consideration. The most important is their fee structure. Read the fine print about how much they charge and give yourself an estimate of what this will cost based on your actual invoices. Also, take into account application fees and what the factor's monthly minimums are.

You should also check to see if the factor has worked with clients in your industry before. This is especially helpful if the factor will be acting as a collection agent and interacting directly with your clients. Also, find out if a minimum contract period is required, and if there are any penalties if you break the contract.

There are many types of receivables factoring agreements, so be sure to ask a lot of questions about how the factor handles invoices. Some factoring services assume all the risk; this is called non-recourse factoring. Others will not protect you against any bad debt losses and might even charge you fees for those unpaid invoices. Finally, be sure that your factoring company will be courteous and professional to you and to your clients.


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