As your business changes and grows, its financing needs will too. Here are six signs you should have your receivables factoring agreement reviewed and re-quoted.
6 Signs You Need a New Receivables Factoring Agreement
As with any other supplier or vendor, it’s only natural that you will review your invoice factoring agreement from periodically to ensure you have a factoring agreement in place that’s best for your business. Here’s why “now” might be a good time to take a fresh look at your agreement and your receivables factoring company.
1. The end of the invoice factoring contract term is approaching.
Just as you would review any other type of contract, before you renew your receivables factoring agreement you should review it and compare it against other offers. Factoring companies might be willing to eliminate unwanted clauses or offer you better terms or rates – or you may find that another factoring company is willing to do so.
You should pay very close attention to the fine print in your current agreement that would require you to provide your current factoring company with 30, 60, or even 90-day notice to terminate your agreement. Unfortunately, if you miss the termination window you may be forced to continue factoring with the same organization for another year or more.
What is receivables financing?
Receivables financing (also known as accounts receivable invoice factoring) is a business finance tool that provides your organization with immediate access to money owed to your business by your customers, without waiting weeks – or months – for the invoices to be paid. Find out more about Receivables Financing.
2. Increases in factoring fees or rates.
Since improving cash flow is an important priority for most businesses that factor receivables, when profits are negatively impacted by increases in costs or rates it’s important to evaluate whether your current agreement is the right one for your organization.
3. Disappointment with the customer service your receivables factoring company provides.
Poor customer service impacts more than just the client who is factoring invoices, it often affects their customers as well. When evaluating how satisfied you are with your factoring company, you may also wish to speak with some of your most valuable customers to ensure that the communications and collections being conducted by your factoring company are also beneficial to the relationship between your business and its customers.
Our goal is to provide the level of service that leads to high client retention and referral rates. We want clients to choose to stay with us throughout the time they employ invoice factoring as a finance tool and to feel comfortable referring colleagues to us on a regular basis.
4. Hidden fees are adding up.
An invoice factoring fee (usually a percentage) is only one of the potential costs that could be hiding in an invoice factoring agreement. We will review any agreement presented to you to explain the fee structure.
We help our clients get factoring contracts that are transparent and simple, with factors that don’t tack on fees for administrative work, schedule processing, proposals, due diligence, customer credit checks or notifications. Hidden fees might seem small but can quickly add up and negate some of the benefits that factoring invoices should be generating when it comes to your organization’s cash flow and working capital.
5. Not meeting monthly minimums (you want to factor fewer invoices).
If your current factoring agreement requires that you factor a minimum number (or amount) of invoices each month and you find that you do not need to (or do not want to) factor up to the minimum, it is a good time to reach out for new terms from your factoring company or to explore competitive proposals.
We have clients who want to use factoring only when its right for their business with contracts that enable them to factor as many (or as few) invoices as they desire. We believe that letting factoring clients retain control of these types of decisions is important, because it has a big impact on their organization as well as how satisfied they will be with our receivables financing service. Invoice factoring becomes an even more practical and helpful financing solution when you stay in control.
6. You simply don’t want to be locked in to a long-term contract.
Depending on the agreement you choose, you won’t have to sign a long-term factoring contract. Remember that this can be a matter of negotiation which could encourage Factors to offer you an agreement with lower rates, higher advances or some other perk.
We want to earn your business and referrals. We believe that once work with us you’ll be so pleased with the level of professional and personal service that you won’t want to leave. If at any time, you feel that the level of service provided by our team isn’t meeting your needs anymore, you’re free to leave without the fear of a long-term contract or exit penalties hanging over your head.
Ready to get a new receivables financing quote?
Whether this is your first request for an invoice factoring proposal or you’re already factoring invoices, we would be happy to give you a free, no-obligation invoice factoring proposal – you could go from approval to funding in days.