There was an article in today’s Wall Street Journal entitled: Fast Money talked about how many companies are using “what was once a controversial way of obtaining quick money–Selling their invoices to a factoring firm.
Although business owners suggest a number of reasons to take advantage of factoring, one of the biggest attractions is no longer having to wait to be paid. Other business owners use accounts receivable factoring to help them get their companies up and running. Still, some business owners see use factoring to help them bridge the cash flow gap for a short period of time.
Still, these same business owners who use factoring also admit that there are some drawbacks, namely the cost of factoring.
The article also included a factoring snap shot for those business owners who are thinking of working with a factor.
- Ask Around – Talk to other people in your industry who have used a factoring firm.
- Check References – When you find a factoring firm you want to work with, ask them for references.
- Choose a Factor who Understands Your Business – Take the time to provide sample invoices for the factoring firm to review ahead of time.
- Listen – Communicate with the factor over the phone to get an idea of how the factor will interact with your customers.
- Negotiate – Once quoted, try negotiating the rates.
- Be choosey – About which invoices you want to factor.
