If you’re eligible and invoice factoring seems like it could be for you, there are a few things to think about when comparing different companies. The easiest way to compare may be by looking at the fees. Most factoring companies will take not just a percentage of the cost of the invoice, but also charge a management fee, and there may be other charges besides this.
Another important question many may ask themselves is: would I be covered for bad debt? Unfortunately, a customer’s insolvency or non-payment could indeed affect your company’s credit rating. However, certain providers offer bad debt protection as an add-on to their services, which means you wouldn’t have to worry about unpaid invoices affecting your cash flow.
Note that invoice factoring could also affect your ability to obtain other types of finance, even if your credit rating isn’t affected. This is because it involves a certain amount of credit transferring, and can therefore make you seem less appealing when applying for a business loan or other type of funding.
Finally, if you’re worried about the trustworthiness of factoring companies, there are a few things you could check. Primarily, there’s the Asset Based Finance Association (ABFA), now part of UK Finance, which holds a list of all the members that have agreed to follow their common rules of conduct. If you want to make doubly sure the factoring company you’re considering is legitimate, look for them on the ABFA register.
If that’s not enough, you could contact other companies that have used the services of the provider you’re considering, or simply even look at what company your competitors may be using. While invoice factoring is not strictly a regulated activity, most businesses will be regulated by the Financial Conduct Authority due to their other activities.
As well as this, by using a trusted invoice factoring broker like Touch Financial you can be sure that the company you choose is not only reputable but ideal for your unique business needs.