Taking the following steps should protect your business: The worst-case scenario is that you use factoring at the wrong time, with the wrong provider. These include things such as expertise, advice and partner network. But there are other less immediately obvious benefits of working with the right partner. The most obvious starting point is the different rates available. Weighing up the pros and cons of each good factoring company also effects how well the service works for you. It’s not always enough to actively avoid a bad factoring company. They aren’t interested in passing on the advantages of factoring to you, but rather in gaining the advantages of you factoring for themselves (and at your expense). These nefarious companies don’t have your best interests at heart but certainly won’t admit their bad intentions beforehand. They could damage your reputation among customers with aggressive collections tactics. Or they could steer you into signing up to an unreasonably long contract. These may, for example, include a clause on their application that hands over collection rights to them. Beware of bad actorsĪlthough not common, there are bad actors in the invoice factoring industry. And as with many industries, there is a also wide range in quality.īecause of this, it’s not uncommon to hear some users (or ex users) of factoring services either enthusiastically praise it, or be very critical. There are many invoice factoring providers out there. How to choose an invoice factoring company Or to switch to a less expensive form of financing. If you decide to use invoice factoring, you should have a road map for how long you will proceed with it.Įventually, you should aim to structure your business in a way that increases cashflow to the necessary level. It is leveraged by a range of companies in different scenarios, from those in financial difficulty to those experiencing high growth.īut needs and circumstances can change often – and suddenly. Used well and at the right time, invoice factoring is a powerful tool. We’ve previously spoken in more detail about what exactly invoice factoring is.īefore understanding its advantages and disadvantages in more depth (below), there are two key initial issues to consider. Key considerations before choosing invoice factoring Ultimately, only you can decide if and when you use it.īy understanding the advantages and disadvantages of invoice factoring, you can gain a broader perspective and make the right decision for your business. Whether it’s right for your business or not depends on too many elements for a one-size-fits-all conclusion. Invoice factoring has its advocates and its detractors.
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