What to Look for When Hiring a Factoring Company
If you’re looking into hiring a factoring company to handle your medical receivables, keep these points in mind as you search! The more you know about your factoring company, the better decision you can make about which one is right for you.
The first thing to look for when hiring a factoring company is price. It’s important in two ways: first, there will be a basic factoring fee, which is generally taken from your reserve. Secondly, but probably more important to understand are all the little extra fees that many factors put in a factoring contract because those can dramatically change the cost of factoring. An example of a few of those: an initiation fee, a due diligence fee, a late invoice fee, a misdirected funds fee, just to name a few. You want to understand each and every one of those before you sign a factoring contract.
You really want to work with a factor who understands the ins and outs of your industry. Why does that matter? It matters for a number of reasons; a really well-versed account management team will be able to process your invoices faster, therefore making the process for you to get money completely seamless. More importantly, someone who understands your business will have a much better relationship with your customers. You will save time by not having to explain the intricacies of the medical receivables industry, as your account manager will have experience dealing with the details of your account and debtors. Instead of worrying about finding a company that understands your business, you can worry about growing it instead.
Depending on the program you choose, some factors require a rigid agreement with a fixed term, minimum or maximum transaction accounts, as well as penalties or high fees if you attempt to break the contract early. Other factoring companies will allow you greater flexibility, not requiring monthly minimum or maximum amounts, as well as giving you a choice about which clients you factor and how often. It’s important to distinguish the fine print in your contract and work with a factoring company that best fits your business.
You definitely want to get an understanding of the level of customer service your perspective factor offers their clients, and how they interact with those client’s customers. Ask for references and even reach out to current or former clients. Chances are, if your prospective factoring company is non-responsive, rude or lacks professionalism, they will act in a similar manner to your clients.
In any economic situation, it’s crucial that you work with a factoring company that can withstand ups and downs of the economy. Looking for a factor that is well-established, experts in your industry and has a balance sheet to support your growth is of utmost importance. Find out how long your factor has been in business, what they specialize in (if anything) and even how many clients they serve, across which regions.