How to pick any Factoring Company.
With the rapid growth in recent years of both the number of factoring companies and the number of different products that they feature the product range of choices for the consumer has increased dramatically. However, with this increase has come a more complex decision when choosing between different factoring companies and the merchandise that they offer.
This article is concerned with providing the reader with a construction within which to make that choice when choosing factoring or invoice discounting.
The Factoring Company
The range of available factoring companies is extremely wide and may be divided in to high street bank owned factors and independent factors. The high street banks that own factoring companies include what is a factoring company lots of the well known household names that you will recognise. Within the independent sector, there are certainly a large quantity of factors that also differ substantially in terms of size. At the littlest end, one factor might have a small number of clients services by a small number of staff up to large independent that’ll have tens of thousands of clients and several hundred staff over a number of nationwide locations. This complicates the option further in that most independents aren’t of similar size.
How to select a Factor (also called a Factoring Company)
You will find advantages and disadvantages with each sector. Below is just a brief summary of the important thing considerations.
High Street Bank Owned Factors
High street banks are substantial organisations and so their clients may benefit out of this in terms of financial security. The odds of the factoring company failing or running out of funds is considerably reduced. However, there are also a number of potential drawbacks. Clients of bank owned factors often complain that the service is not just a personal as they would like. In some instances the factor may take a call centre style method of managing their clients, with no single nominated point of contact. In several cases this call centre support has even been outsourced abroad which can cause a further feeling of isolation for the client.
Also, bank owned factors often rely upon their bank network to offer many their new business. In some instances, this can result in a feeling of complacency about acquiring new customers as they’ve a reasonably captive audience to work with.
Many clients also state the old adage of not ‘putting all your eggs into one basket’ when they elect to factor with a different party from that they bank. In many cases, the client will retain an overdraft facility with their bank once they begin a factoring facility, although this can often be “in case there is need” only. Many clients are involved that if their overdraft and their factoring facility is managed by the same bank, they might see both withdrawn simultaneously if their business should start to experience financial difficulties.
Lastly, you should think about the banks risk policies or rules. We locate quantity of clients that complain that the financial institution owned factor that they cope with is constrained by the banks rule book. This may cause too little flexibility regarding funding and particularly supporting a customer through financial difficulties.
However, if you’re seeking a well known name to offer your facility, a high street bank owned factor could be the right solution for the business.
Independent Factoring Companies
Independent factors aren’t owned by a high street bank but they may be owned by substantial businesses offering almost the same amount of comfort to you whilst the client. Within the method of choosing a factor, it’s important that you understand the ownership of the factoring companies that you’re considering.
Clients often find an independent factor will offer them a far more personal, relationship based service. However, this isn’t to everyone’s taste and some clients are seeking a far more transactional service that they can manage on the internet. The independents tend to be reliant on client recommendation for new business, rather than a bank network, and so it may be argued they have to be extremely centered on ensuring that their service is really as strong as possible.
How big the company that the client is working with must certanly be considered, too small and you might face instability problems but with size comes the task of maintaining a personal service and relationship. The factoring market has factors at all stages along this spectrum and one of our advisers can give you additional information in regards to the factors that perhaps you are considering or the ones that would meet your requirements.
Another key aspect to think about is credit control or the collections service (if you require this service). With factoring, this service normally comes as part of the service although the way it’s conducted can differ enormously. In a few organisations there would have been a credit controller focused on your account such that you could replace your own personal staff with this individual and save money. In other factoring companies the collections service can be very different with pools of staff chasing debtors so relationships are less likely to be developed with debtors.
In other cases, only the very best few customers are contacted by telephone by the factor. In some instances, the factor’s chasing is entirely handled by written automated letters and statements with the client retaining the responsibility to make the telephone calls. This might be an acceptable arrangement when you have the resource to undertake the credit control and you might argue that this might conserve money on the expense of the service. In any event, as a possible client you will need to understand the level of service that you could expect and the implications on the expense of the facility so that you may make the very best decision for the business.
Once more, our advisers will have a way to give you guidance on the basis of the actual experiences of clients that individuals have placed with particular factoring companies.
Summary – How to Choose a Factor
So to summarise, there are lots of aspects to think about when selecting a factoring company, who owns the company, how financially stable will they be, how can you be serviced and how will the collections be handled. Many factoring companies will have a way to give you case studies about existing users of their products that may be in similar industry sectors to you. They may also be able to put you in touch with existing clients that will tell you firsthand about the caliber of the service that they receive.
They are only a few of the questions that you might ask but we hope this provides you with some assistance in making the choice. Our advisers are always available to steer you though the method and our service is both completely independent and completely free of charge for you yourself to use.