How to Choose the Right Factoring Company: 5 Key Considerations

Choosing the right factoring company is hard to do when other companies claim to offer the best invoice factoring solutions. However, the reality is that many factoring companies come and go, often depending on their access to capital and their ability to deliver on promises. So, how do you find a reliable partner in the sea of claims?

Here are five essential things to consider before selecting a factoring company.

1. If It Sounds Too Good to Be True, It Probably Is

Some factoring companies market themselves with vague promises and unrealistically low factoring fees. Remember, invoice factoring is typically more expensive than traditional bank financing due to the higher risk and labor involved.

A reputable factoring company will perform extensive due diligence: running credit checks, reviewing contracts, examining invoices, managing payments, and more. These are necessary and resource-intensive tasks. So if a quote seems drastically cheaper than others, make sure you’re comparing apples to apples, ask detailed questions, and thoroughly review the contract. What services are included? What’s excluded? Are you really getting what was promised?

2. Understand When and How Rates Increase

Many invoice factoring agreements come with tiered rate structures; the longer an invoice remains unpaid, the more you may owe. Some factoring companies only emphasize the initial rate during the sales pitch, but you need to understand what your real cost will be based on your customers’ actual payment behavior.

For example, if your client typically pays at day 35 but your factoring rate escalates at day 10, that low starting rate is misleading. Always ask: When does the rate start increasing, and by how much? Your true factoring fee depends on the timing of your customers’ payments, not the teaser rate up front.

3. Define “Great Customer Service”

All factoring companies promise excellent customer service, but what does that really mean in practice? At a minimum, your factor should:

• Answer the phone promptly
• Connect you to knowledgeable staff
• Resolve issues quickly and respectfully

Factoring isn’t just about getting cash; it’s about partnering with someone who understands and helps you overcome your business challenges. Look for transparency, flexibility, and a problem-solving mindset. These qualities are especially important during unexpected situations when you need support the most.

4. Don’t Get Locked Into Long-Term Contracts

Factoring contracts vary widely in length, from monthly agreements to multi-year commitments. Many renew automatically and can include steep early termination penalties. Make sure you fully understand the contract terms before you sign.

Consider your specific needs: Do you need short-term working capital or a long-term financing solution? Some businesses only require invoice factoring for a few months, while others build a decades-long partnership with their factor. Choose a factoring company that offers flexible terms so you’re never stuck in a relationship that no longer serves you.

5. Know Exactly What You’re Paying For

Understanding all applicable factoring fees is essential. Reputable factoring companies should disclose these in your agreement, but terminology can differ. Setup, processing, and treasury fees can vary in meaning and cost from one provider to another.

Before signing a contract, get a clear breakdown of:

• What each fee is for
• When it is charged
• How much does it add to your overall cost

If you can’t get straightforward answers, consider that a red flag. Transparent communication is the foundation of a strong factoring relationship.

Why Choose Scale Funding as Your Factoring Partner?

At Scale Funding, we know that trust and transparency are just as important as competitive rates. That’s why we make our onboarding process honest and straightforward:

• No fine print. No hidden fees.
• Clear, upfront communication about all factoring fees and services
• Month-to-month agreements—so you’re never locked into a long-term commitment you don’t need
• Real customer service—we answer the phone and address your questions immediately

With Scale, you’re not just choosing an invoice factoring provider—you’re choosing a partner that’s committed to your growth. We take pride in being one of the few factoring companies that lead with integrity and clarity, every step of the way.