What to Look for When Comparing Factoring Companies

There are 1000’s of companies across the United States that use invoice factoring as a source of financing. When choosing a factoring company most people focus on advance rates and factoring fees. To use factoring to it’s fullest potential, business leaders should research the additional service features when comparing factoring companies. The additional services are what separates one factor from another.

Comparing Factoring Advance Rates

It’s natural for someone interested in factoring their invoices to look at the dollars and cents first. The key elements of all factoring agreements are the advance rate and the factoring fees. These determine how much upfront money is advanced, and what the final cost of factoring will be.

Advance rates are based on a number of variables. These include the industry the client is working in, the average invoice amount, and the invoice terms. Companies in the trucking industry, staffing and employment industry, and oilfield industries are usually quoted advance rates around 90 percent. The advance rates for construction, manufacturing, and warehousing companies are generally in the 60 to 80 percent range.

Comparing Factoring Fees

Factoring fees are the cost of factoring. Factoring companies base their fees on the volume of invoicing the client commits to factor each month, the credit and payment history of the client’s customers, and the length of time it takes the customer to pay the invoice.

A business will get the best factoring rates if they have a high volume of invoicing each month, spread out over a number of customers. Businesses that have a concentration of their work or services with just a few customers can be more of a risk and rates will reflect this.  The blog post, Factoring Rates & Fees Explained, provides additional details on factoring rates and fees.

Comparing Factoring Services

Factoring companies offer their clients various services to add value to the factoring relationship. The value-added services are what separates one factor from another. Some of the most common value-added services include:

• Electronic Invoice Uploading
• Same-Day Funding
• Online Reporting
• Collections

Most factoring companies offer some or all of these services. Be sure to ask about these services and any related costs to use them.

Industries Served by Factoring Companies

When comparing factoring companies, one important consideration is the industry knowledge of the factor. There are two types of factoring companies; general factors and niche factors. General factors serve clients in a wide range of industries, without specialization in any area. While these factors can offer good rates, their understanding of your industry may be limited. This can have an effect as business fluctuates or evolves over time.

Niche factoring companies specialize in serving clients in specific industries. They have a greater understanding of the details of the work, invoicing, and payment processes. This is very beneficial to the client and makes the transition to factoring very easy. When researching and talking to a factoring company, be sure to ask about their experience and knowledge of the industry you are in.

Factoring With Scale Funding

Scale Funding offers invoice factoring services to companies in oilfield services, staffing, trucking, and other service industries. Since 1994, thousands of small and mid-size companies have used factoring with Scale Funding to built lasting financial strength and grow their business.

Scale Funding is a full-service factoring company, and much more. Scale Funding offers clients all of the standard services, plus a number of value-added services that save both time and money.

✅ Credit Analysis and Risk Management

✅ Professional AR Management

✅ Full-Service Treasury Operations

✅ Customer Service Experts

All factoring companies offer high advances and low rates because that’s the nature of the business. Companies that use factoring want more and Scale Funding is where they get more. For a free, no-obligation factoring consultation and quote, contact us via the web form, or call 800-707-4845.