Factoring is a lending option in which your small business borrows money against your invoices. Whether you’re trying to survive a slow cash flow due to the season or need an influx of cash to handle an immediate repair, factoring can help you get through the hump. Here’s how to choose the lending company, AKA factor, who will be an ally for your business.
Determine Your Goals in Factoring
Before factoring, you should understand what your goal is. Factoring isn’t an option for every business. You should know how you plan to use the money and whether you have any other options. You should understand the basics of factoring, to know what is most important to your in your lender. You want flexible timelines, an easy application process and low fees.
A little research before you sign with a lender can give you more confidence in your choice. You should ask many questions in your interview:
- Does this factor have experience in your industry and with businesses your size?
- What are the terms, fees, and conditions?
- Can this factoring be scaled as my company grows?
- Do you have to factor in all your invoices or just some?
- What happens if the client doesn’t pay the invoice?
- How do you inform my clients about the factoring to protect my reputation? Although factoring is becoming more mainstream, not everyone understands the details.
- What type of references does the factor offer?
You need to trust your factor, so it’s important to feel comfortable with your decision. Factoring is a business arrangement, not a favor to your business. You are the customer. Do your due diligence before signing a contract to feel good about the business you’re partnering with.
Contact Magis Funding for more information about factoring and what it can do for your business.