It’s a well-known fact that if a business is having a hard time securing bank financing, accounts receivable factoring is a good option because a factoring firm is willing to look at a company’s ability to grow, rather than focus on its past. However, factoring firms can still be selective when it comes to approving clients.
Here are a few tips that will help make your business more attractive to a factoring company:
Factoring companies want to know how your customers payment trends so they can design the appropriate factoring program to meet your company’s needs. Develop a system or purchase the appropriate software (i.e. QuickBooks) to track and monitor your company’s accounts receivables.
Accounts receivable factoring firms are concerned with the creditworthiness of a company’s clients (debtors), because it is the debtor who will be paying the factor. Have a plan in place to check your customer’s credit so that you can make sure you are only doing business with creditworthy customers.
A funding company wants to work with passionate business owners. Give the factoring company an idea of how much you routinely bill and how much you project your business can grow by utilizing accounts receivable factoring.
Because a funding company advances cash on invoices, it’s important for your business’ accounts receivable to be free and clear. Pre-existing loans listing accounts receivable as the collateral makes it harder to factoring firms to feel comfortable advancing money.
Communicating to a factoring company why you need accounts receivable factoring is crucial. Don’t be afraid to tell a firm that you were unable to be approved for bank financing or that your credit is less than perfect. Accounts receivable factors can work around most credit issues, and being honest about them in the beginning will save both parties a lot of time and effort in the long run, while also building a strong foundation of trust.
Click here to learn more about PRN Funding’s accounts receivable factoring program.