Four Types of Invoice Factoring Companies
More or less, there are four varieties of invoice factoring companies:.
- substantial, establishment receivable financing companies,
- full-service discount receivable financing companies:
- specialized niche receivable factoring companies, and- receivable factoring company brokers.
Eventhough full-service factoring companies: make up the largest percent of factoring companies in the United States, specialized niche invoice factoring companies are gaining some ground. The major big difference amongst the two is capacity. Full-service invoice factoring companies are usually to possess the financial support needed to take care of almost any account, while particular niche factors tend to be smaller sized and far more limited. Also see Transportation Factoring Program.
When you have limited your option to a few of factors, you can decide on your factoring company based on how they respond to a number of forthright questions– will you be in direct contact with a decision maker and how will your account compare to the receivable financing companies’ other types of accounts? Take the time to get to understand the factor ahead of making a commitment. Look for stability, trust, and professionalism and reliability. Most notably, go with your feelings.
In the event that you find yourself in a position to contrast invoice factoring with bank loans, it won’t take long for you to learn the obvious. One is fast and flexible; the other is snaillike and strict.
Regulatory criteria place huge restraints about what banks can and can’t do for many firms. Being impartial, banks do the job within an established set of specifications. They must look into your financial commitment to the business, the company’s cash flow for the last three years, documentation of strong collateral, and your own personal wealth (and possibly even that of your spouse). Factors, conversely, check out current sales and the creditworthiness of your customers.
The bottom line is that, for a growing variety of small companies, it is just not cost-effective for the majority of banks to authorize their loans. That is perhaps why they make it so tough to qualify. This is among the principal good reasons invoice discounting has grown into such a wide-spread operation– it is supplying a substantial gap which was created when banks began putting into effect stricter lending criteria. Read also about Transportation Factoring Program.