While a viable and easy funding option, invoice factoring sometimes gets a bad reputation. Some say it is impossible to avoid high-interest rates. Others say it’s only for large business. Some people even think the process is a hassle for your clients.
Those statements couldn’t be more wrong.
Let’s break down a few common factoring misconceptions and myths.
Factoring Misconceptions and Myths You Need to Stop Listening To
Whether they are ill-informed, slightly off or completely wrong, these factoring misconceptions and myths are passed around through water cooler talk. But, it’s time you stop believing everything you hear.
1. Factoring Companies Only Offer High-Interest Rates
False. Factoring costs and interest rates aren’t all that high; some may even be as low as standard credit card rates or bank lines. However, don’t get frustrated if you hear “It Depends” when asking about standard interest rates and costs.
Why? Because factoring companies look beyond credit history, when offering invoice factoring they look at a number of factors including:
- Strength and Payment History of Customer
- Length of Time it Takes to Receive Payments
- Volume of Invoices
- Frequency of Invoices
Still concerned about the cost of factoring to your bottom line?
Learn what you can do to reduce factoring costs.That’s right. You also have control when it comes to your factoring agreement.
In fact, all details (including interest rates) are negotiable until you sign the dotted line.
2. Invoice Factoring Only Works for Large Companies
Maybe at one time, but not anymore. Today, factoring works for small, mid-sized and large companies in a variety of industries including Construction, Oil & Gas, Technology, Trucking, Law, Medical and more. Now it could be for everyone if you meet a few key criteria including:
- Creditworthy Business Customers
- Ethical Business Practices
- High Profit Margins
- Higher Invoice Amounts
While it’s true that factoring may not be for everyone, it’s not just for large companies. Small and medium-sized businesses looking for funds profit from invoice factoring as well.
3. Only Failing Companies Benefit From Factoring
This is one of the classic and more popular factoring misconceptions.
It’s true; factoring can be a cash flow solution when you need money now to keep the doors open and pay bills. But, many businesses use the fast access to cash for growth and expansion.
4. Factoring Offends Customers
Yes, factors occasionally call customers. But, only as a reminder of payment or past due invoices. But, that is it. In fact, they may call less than you would.
Furthermore, Factoring companies do not harass clients. They understand this is a business transaction that relies on regular customers and invoices and their actions and calls reflect this relationship.
5. Finding and Signing Up for Factoring is Hard
Actually, signing up for factoring is incredibly easy. All it takes is the decision and action towards signing a factoring agreement.
Wondering if your company and funding needs fit invoice factoring? Contact us today or apply online.