A common approach when looking for invoice financing is to send out as many applications as possible and then compare rates. However, there is a better way that will help you find companies that best fit your needs.
In the factoring industry the rate or the fees charged by the Factor. is generally equal to the perceived risk and the perceived cost of providing the service. The rate that a company charges reflects the perceived risk of not getting paid back and the perception of what it is going to take to manage the new account.
Therefore to get a lower rate you must lower your perceived risk in the eyes of the Factor and present a profession image so that management of the account will not be a problem.
How can I lower my risk?
1. Find a factoring company that is familiar with your industry, some factor know some industries very well and others no so well.
2. Be professional
3. Have a good application that is clear and provides all the information to support your application
Ask them! The majority of companies will have no qualms about telling you their specialties and what their average client looks like. If they have a good understanding of your industry they are more likely to give you better rates.
However, it is important that you do your due diligence by asking some key questions about your industry, so you can judge their understanding of your industry. Questions could be about industry specific procedures or about the companies that they already deal with in the industry. It is also in your interest to ask them to provide a few references that have been clients for more than one year.
Present a professional image: The factoring company needs to perceive your business as a well-oiled machine that is run well and does not have any significant problems. If you present your company in a professional manner, your perceived risk will be lower and the rates that are offered will reflect that.
Having a complete and well written application: Most factoring companies receive numerous applications every day and are accustomed to getting applications that are difficult to read, are missing information, or inaccurate. So, if you make the effort to present a complete,