A factoring company is an excellent alternative to a bank or other traditional financial institution. Do you find that your company experiences short-term cash flow problems? Invoice factoring is a popular and effective service that will solve the temporary shortage. Know the three important factoring company considerations here.
Essentially, a factoring company will buy your invoices receivable, giving you a cash advance on those invoices on which you are expecting payment. The terms are straightforward, and you can generally get a cash injection on the same day. Here are three important factoring company considerations they use before agreeing to purchase your invoices:
1. Your company’s business and financial history
One of the main benefits of invoice factoring is that it primarily depends on your customers’ creditworthiness rather than your own. However, the factoring company will still need to do its due diligence and ensure that you are generally in good shape.
2. Your customers’ credit history
Your customer’s financial history is the most critical consideration. The factoring company needs to have a high degree of certainty that if they advance cash to you on your receivable invoices, they will be able to collect that money from your customers later on. They will investigate your customers and check up on their payment histories, credit scores, the industries in which they operate. They will also consider whether they have any debt or legal issues that may affect their payments.
3. Your relationship with your customers
The factoring company will also check how long you have been doing business with your customers. If you have a good credit history and a good, long relationship with your clients, the factor will give you better terms as they regard you as presenting a minimal risk.
Kore Capital Corporation is a provider of a wide range of business financing services, including invoice factoring. If you need a factoring company to help you alleviate your cash flow problems, contact us today.