You’ve decided to start Factoring your accounts receivable invoices for immediate cash. What are some of the questions you need to ask before committing to your new Factor finance company?
- “How long does your contract require me to work with you?”
- “Can I leave before the contract maturity date?”
- “How much will it cost me to end our contract before the maturity date?”
- “If termination fees, how do you calculate those fees?”
Regardless of what the account executive tells you over the phone, make sure and double check the contract. Look for a section called “Term” or “Termination”
TIP: A contract that has no specific length of time specified, that ties you to the Factor is in your best interest.
You need to decide if you want Non-recourse factoring. In our experience, non-recourse is the best. Simply put, if your customer doesn’t pay the Factor, the Factor can’t come after you for the money they’ve already advanced you; hence the term “non recourse”
True Non-recourse should cover you in everything accept product delivery or service issues. Here are some questions you need to be asking for True Non-recourse Factoring.
- “Do I have to sign a personal guarantee?”
- “If the Payer goes Bankrupt am I protected?”
- “If the Payer doesn’t pay, but didn’t claim bankruptcy am I covered?”
- “What happens if the Payer doesn’t pay until after the invoice due date?”
- “Will I ever be charged back or have to repurchase the invoice?”
- “Do you charge your fee upfront and take it out of my advance or the reserve amount collected at invoice maturity date?”
- “Are you holding a reserve?”
- “Does my rate increase as the invoices ages?”
- “Do I have to Factor all my business invoices with you, or can I Factor select invoices?”
- “At what age does the invoice get Charged Back?”
- “Is the rate fee FIXED on a Charge Back Invoice or does the rate fluctuate?”
- “How soon after the invoice is paid do I get my reserve?”
- “What is the cost to get setup with your Factor Company?”
- “Is there any application fee?”
- “What is the minimum you require, that I have to Factor each month?”
- “What if I don’t meet these minimum amounts, what are the fees if any?”
- “When do I pay my UCC financing statement fee; Before or after I Factor my first invoice?”
- “Will you fund on faxed, scanned or copied documents, or must you have the original?”
- “Does the rate increase if the document submitted for funding is not the original?”
- “How long do I have to submit the originals before I start getting charged late fees?”
- “How much are these late fees?”
- “How are short pays and chargebacks handled?”
- “How am I notified in the event of a dispute resolution and what is the process?”
- “What do you do if the Payer says they paid me directly, but I tell you they did not?”
- “Is the Payer required to produce a front and back copy of the delivered check proving it cleared, in the event of a dispute?”
- “Can you ACH direct payments to my bank account?”
- “Can you split payments; Like half of the advance ACH direct deposit and half to Western Union or Money Gram?”
- “Does your contract include provision for Field Audits?” Some factors want you to pay their costs in the event they need to come to you for an audit you in your local city, state.
- “Does your contract force me to pay your attorney fees?”
- “What does your UCC filing cover? Is there a lean on the Accounts Receivable or all assets?”
- “Do I have to factor all of my customers? Once I start Factoring do I have to include all my customers, moving forward?”
- “What are your fees to get me my money? What payment options do you offer, ACH, Wire, Mail Check, Fuel Card?”
- “Is there any per invoice fees?”
- “Is there any other fees in addition to the factoring fee?”
- “Do you pay a referral reward if I refer a new Factoring customer to your company?”
Make sure you’re getting the best offer when Factoring your Accounts Receivable Invoices. Use Factor App – Where Factors compete to Buy your open accounts receivable invoices for immediate cash.
*Copy the Questions above and email them to the top 3 Factors you’re considering. Ask them to replay to each question within an email so you can compare your options and find out which Factor is right for you!