Choosing the right factoring partner is one of the most important financial decisions a staffing firm can make. A strong partner keeps your payroll running smoothly and your cash flow steady. A poor choice can mean hidden fees, slow funding, and damaged client relationships.
According to Staffing Industry Analysts (2025), the average staffing invoice takes 45 days to pay. Factoring fills that gap —but only if you work with a reputable, transparent provider. Here are the 10 most common mistakes (and how to avoid each one).
Why Choosing the Right Factoring Partner Matters
Factoring is more than a financing transaction —it’s a relationship. Your factor will communicate with your clients, verify invoices, and manage payments on your behalf. That means their reputation becomes an extension of yours. The right partner enhances credibility; the wrong one creates friction.
Top 10 Mistakes (and How to Avoid Them)
1. Focusing Only on Rates
Mistake: Selecting a factor solely for its lowest fee percentage.
Why it’s risky: Low fees can mask slow funding or high add-on charges for verifications and wire transfers.
Fix: Compare total cost of service—look at advance rates, speed, and support quality alongside the stated discount rate.
2. Ignoring Industry Specialization
Mistake: Partnering with a generic financial firm that doesn’t understand staffing cycles.
Fix: Choose a factor that specializes in healthcare or temporary staffing. Niche providers like PRN Funding know how to navigate vendor portals and facility billing systems.
3. Overlooking Advance Rate Details
Mistake: Assuming all factors advance the same percentage.
Fix: Ask for the exact advance and reserve rate. Top staffing factors advance 85–90 percent, releasing the balance after client payment.
4. Missing Hidden Fees
Mistake: Skipping the fine print. Extra charges for credit checks, UCC filings, or ACH transfers can erode profits.
Fix: Request a full fee schedule and confirm whether pricing is flat or tiered. Transparency is non-negotiable.
5. Neglecting Client Experience
Mistake: Not considering how the factor interacts with your customers.
Fix: Ask how they verify invoices and handle collections. A professional factor protects client relationships through courteous communication and clear documentation.
6. Choosing Without Checking Contract Length
Mistake: Signing multi-year agreements with hefty termination fees.
Fix: Negotiate flexible terms —most reputable factors offer month-to-month or 12-month contracts with reasonable exits.
7. Failing to Confirm UCC Status
Mistake: Applying while another lender holds a blanket lien on your receivables.
Fix: Search your state’s UCC filing database before signing. Release or subordinate existing liens to avoid delays.
8. Underestimating Verification Speed
Mistake: Not asking how long invoice verifications take.
Fix: Select a factor with dedicated healthcare verification teams. Top firms fund within 24–48 hours after invoice submission.
9. Skipping Technology Capabilities
Mistake: Working with a factor that still uses manual uploads and paper statements.
Fix: Confirm availability of a secure online portal for invoice uploads, funding requests, and reporting. Digital transparency reduces errors and speeds cash flow.
10. Not Evaluating Customer Support
Mistake: Choosing a partner with limited staff or offshore support.
Fix: Test response times before signing. Call their support line and ask about dedicated account managers. Reliable communication is as valuable as low rates.
Checklist: What a Reliable Factoring Partner Should Offer
- Industry expertise in healthcare and staffing
- Advance rates of 85–90 percent
- Transparent flat fees (1–4 percent range)
- Fast funding within 48 hours
- Dedicated support and online account portal
- Flexible contracts and no hidden charges
If a provider fails more than two of these checks, keep looking. A true financial partner will welcome these questions.
Final Takeaway
Avoiding these ten mistakes ensures you select a factoring partner that enhances—not hinders—your growth. With the right provider, you can stabilize cash flow, fund weekly payroll, and focus on recruiting and placements instead of collections.
Next Step:
Request a Factoring Consultation from PRN Funding to see how a specialized staffing factor can help you avoid these pitfalls and improve cash flow in 2025.
