Do’s and Don’ts: Complete Guide to Choosing the Right Factoring Company

Do's and don'ts written on a chalkboard at the office


As a small business owner, you understand just how important it is to stay on top of cash flow and what a challenge that task can be. Without sufficient cash flow, it will be difficult to meet payroll, operate smoothly and meet your financial obligations. If cash flow is not managed correctly, it can quickly cause your business’ growth to stall.

One of the biggest advantages of partnering with a factoring company is that they can help your small business boost its cash flow and secure unlimited funding potential. From bridging invoice payment gaps to securing assistance with back-office tasks, their invoice factoring services can prove to be invaluable to your small business’ growth. However, like any type of financing, it is incredibly important to make sure you avoid common mistakes and select the right company for your business’ unique needs.

To help you get started, our team has compiled a list of things you should look for and things you should avoid when choosing a factoring company.

Don’t: Work with a factoring company that does not understand your business type and industry

With so many factoring companies to choose from, the first thing you should verify is whether they specialize in working with your business type and industry. Some factoring companies serve a wide variety of industries, while others focus on a specific niche. Each industry faces its own set of unique needs and challenges when it comes to sustaining long-term growth. As such, it is important to find a factoring company that does not take a one-size-fits-all approach and offers experience in the field you serve.

Do: Inquire after value-added services that can help your day-to-day operations

Something many business owners do not realize or consider is that many reputable factoring companies also provide a variety of additional services that can help day-to-day business operations. For example, the assistance a factoring company offers with invoice review and collections frees up valuable time and resources. In addition, the basic credit check a factoring company performs to ensure a client is likely to pay you gives you the confidence to accept that new job or order with confidence.

small business invoice factoring paperwork

Don’t: Withhold important information for fear you will be disqualified

As a small business owner, finding business funding can be a huge obstacle to growth. When you finally discover a lender willing to work with you, it can be tempting to leave out certain unfavorable information like poor history. However, failing to include such information on your application will only delay approval or cause you to be denied all together. In truth, if your business is stable and solvent, your past credit rating should not affect your acceptance by a factoring company. Credit is not the only factor they consider; they are more concerned with the creditworthiness of your customers and your reputation for providing quality services or products.

Don’t: Overlook the importance of the application process

One of the biggest benefits of working with a factoring company is the simplicity and speed of the application process, which is why many companies choose factoring when they need a quick injection of cash. With Security Business Capital, for example, you can have cash in your business’ bank account in as little as 24 hours. Keep an eye out for companies that take a long time to approve your application. If a factoring company has a long wait time, you will likely run into similar issues when trying to fund your invoices in a timely manner.

Do: Find out if the factoring company has the capital to grow with your business

As your company grows, so will your cash flow needs – especially if your business experiences rapid growth. From buying new equipment and expanding your location to adding to your team and investing in technology, your need to fund invoices will likely increase. Make sure that the factoring company you choose is capable of growing with you. Newer factoring companies might not have the resources necessary to fund your invoices as you take on more customers and expand. Factoring companies that have served your industry for many years, on the other hand, will typically have a greater capacity to help you grow your business.

Don’t: Forget to consider online features and overall ease of access

In today’s fast-paced digital world, accessibility is a must. It is essential for your business to have convenient online features and easy access to vital information about your account. Ideally, you should be able to access your account online at any time of the day, and receive reports and other key information quickly. Make sure you also ask how invoices are submitted. Some factoring companies offer mobile solutions that allow you to submit invoices from anywhere at any time, making the entire process simple and straightforward.

Do: Discuss the customer service aspect of the collections process

When you partner with a factoring company, their team takes on the responsibility of invoicing the customer andhandshake between businesswoman and construction worker collecting the amount due. Your customer is then obligated to pay the factor according to the terms of the invoice. To ensure your build and preserve strong, positive relationships with your customers, you want to work with a factor that is courteous and professional. Make sure the factoring company has years of experience, a dedicated team and a culture that emphasizes a superior level of customer service.

Security Business Capital’s Invoice Factoring Services

Security Business Capital has built an experienced and dedicated team of individuals with years of expertise in providing flexible cash-flow solutions that help businesses thrive. Oil and gas services, temp staffing, manufacturing/distribution and transportation are just a few of the business types that frequently use our invoice factoring services to generate cash on hand. If your business is struggling to manage cash flow fluctuations and fund growth, Security Business Capital offers a fast, simple and hassle-free set up process. Your business can receive up to 95 percent of an invoice’s value in as little as 24 hours. 

To learn more about how our invoice factoring services work and how they can help your business grow, get in touch with us today for a free quote and/or consultation.