Factoring services are still widely misunderstood in many industries. We’ve rounded up some of the top myths that need to be debunked:
- Companies choose factoring only as their last resort
Many thriving companies with dependable cash flow turn to factoring to access the funds that have been sitting in their accounts receivable for weeks or months. These companies have no trouble paying their regular fixed expenses, but factoring is a great funding method when they are ready to buy new equipment or carry out business plans for expansion. The benefits of upfront payment on their invoices appeal to business owners in all kinds of financial situations, not just companies with financial challenges.
- Factoring companies are lenders
Factoring companies are definitely not like banks: they do not lend you money that you must pay back. Factoring companies pay you for work you have completed and pay you what you have already earned. The difference is that with factoring, you get paid right away what you are owed. You do not have to wait on your customers to pay your invoices – you do not incur debt.
- Factoring companies only provide collections services
A factoring company’s primary function might be advancing funds on accounts receivable, but these businesses often offer additional services that can save you time and money. Not only do they manage your collections process, but their niche, value-added services and benefits for different industries can include payroll management for staffing agencies and invoice preparation and discount fuel cards for trucking companies. Look for a company that serves other clients in your industry because they may offer you services that you might not have considered outsourcing in the past.
- Factoring companies could affect my customer relationships
Some business owners are apprehensive about partnering with a factoring company because they wonder what it will be like with the factoring company collecting payments from their valued customers. They would be glad to know that well-established factoring companies have very good payment collection techniques and employ only skilled and courteous collections professionals. A reputable factoring company owner knows that keeping your customers happy will keep you happy — and your satisfaction is key to retaining you as a client.
Since 1993, the factoring experts at Interstate Capital have cleared away the mystery and misconceptions about factoring for thousands of clients and helped them reach their financial goals. Contact us for a factoring rate quote today.