What to Ask a Potential Factoring Company
We have mentioned in a few blogs that a variety of companies, regardless of where they are at financially, use factoring companies in order to get payment on an invoice when a client or vendor isn’t paying said invoice. When a company is in need of cash to pay employees their wages, or simply to help grow their business, this method is a simple way to get what you need. However, there are plenty of options when it comes to which company to choose. If you’re interested in working with a freight factoring company, Financial Carrier Services can help you out. But if you’re still shopping around, here are some questions you can ask potential companies to ensure they are right for your specific needs.
What is Your Fee Structure?
This will greatly depend on the company, so it’s important to get a clear answer from each factoring company you’re talking to. Some companies will have a flat fee regardless of the amount of the invoice or how long it’s been overdue. Others will charge a fee based on the value of the invoice. There may also be other fees, including money transfers, software, collateral, and other costs. If it seems like a company is being hesitant about providing fee structure information, don’t waste a minute and call us at Financial Carrier Services.
Do You Offer Both Recourse and Non-Recourse Factoring?
This question has to do with who takes responsibility of the invoice if your customer cannot pay, or refuses to pay, the invoice.
Recourse: You have whole responsibility of the invoice. In this case, the factor may withhold a percentage of any future cash advances, it does not mean you have to pay the debt all at once or out-of-pocket.
Non-Recourse: The factoring company takes on responsibility of the invoice.
In the end, the type of advance depends on the type of customer you’re working with, so it’s important to have both options. At Financial Carrier Services, we have a team of credit experts who can look at your customers financial situation in order to determine if recourse or non-recourse factoring is the best option.
How Long Have You Been in Business?
When it comes to your company’s finances and accounts, it’s important to know that a factoring company has the knowledge and resources to actually help. You don’t want to work with a team who is figuring things out as they go, or who doesn’t have specific knowledge about your industry. Financial Carrier Services has a team of people who have worked in both the financial sector and the freight and trucking industry. Because of these valuable insights into both fields, we can provide superior service as a freight factoring company.
Do You Offer Other Service?
A really good and beneficial company will offer more than just factoring services. Even though this may be the primary reason you’re working with them, there could be other services that are equally beneficial. Financial Carrier Services offers no credit check financing, unlimited free credit checks, truck warranties, and access to other jobs through our sister brokerage.
Do You Have the Resources to Grow With My Company?
Unlike a bank loan, where there is typically a single amount that is given at a time, factoring services often offers unlimited financing. In the beginning, you may want to use a factoring service in order to pay employee wages, but as your company grows and it’s time to increase your fleet of trucks, you may need to factor bigger invoices that will allow you a bigger cash flow. Ask as many questions as you want to learn about a potential company’s client base, typical account sizes, if there is a limit to the number of debts, and the structure of the company’s capital.
These questions will get you started on the right foot on your search for a factoring company. If you’re looking specifically for a freight factor, get in touch with the team at Financial Carrier Services. We’ll be happy to answer any of your questions.