With the rapid growth recently of both how many factoring companies and how many different products that they give the range of choices for the consumer has increased dramatically. However, with that increase has come a more complex decision when selecting between different factoring companies and the products that they offer.
This article is worried with providing the reader with a framework within which to make that choice when selecting factoring or invoice discounting.
The Factoring Company
The product range of available factoring companies is extremely wide and may be divided into high street bank owned factors and independent factors. The high street banks that own factoring companies include factoring finance company most of the well known household names you will recognise. Within the independent sector, there are certainly a large quantity of factors that also differ substantially in terms of size. At the tiniest end, an issue may have a number of clients services by a number of staff up to large independent that may have thousands of clients and several hundred staff over several nationwide locations. This complicates the decision further in that all independents are not of similar size.
How to select a Factor (also called a Factoring Company)
You will find advantages and disadvantages with each sector. Below is a brief summary of the main element considerations.
High Street Bank Owned Factors
High street banks are substantial organisations and so their clients will benefit from this in terms of financial security. The chances of the factoring company failing or running out of funds is considerably reduced. However, additionally there are several potential drawbacks. Clients of bank owned factors often complain that the service is not just a personal as they would like. In some cases the factor may take a call centre style way of managing their clients, with out a single nominated point of contact. In a couple of cases this call centre support has even been outsourced abroad that may cause an additional feeling of isolation for the client.
Also, bank owned factors often rely upon their bank network to supply many their new business. In some cases, this can lead to an expression of complacency about acquiring new clients as they have a reasonably captive audience to work with.
Many clients also state the old adage of not ‘putting all your eggs into one basket’ once they decide to factor with a different party from that they bank. Oftentimes, the client will retain an overdraft facility with their bank when they set up a factoring facility, although this will often be “in case of need” only. Many clients are worried when their overdraft and their factoring facility is managed by exactly the same bank, they might see both withdrawn simultaneously if their business should start to see financial difficulties.
Lastly, you should think about the banks risk policies or rules. We locate quantity of clients that complain that the bank owned factor that they deal with is constrained by the banks rule book. This will cause a lack of flexibility regarding funding and particularly supporting a consumer through financial difficulties.
However, if you should be seeking a well known name to supply your facility, a higher street bank owned factor could be the right solution for the business.
Independent Factoring Companies
Independent factors are not owned by way of a high street bank but they could be owned by substantial businesses that offer almost exactly the same degree of comfort to you whilst the client. Included in the procedure of selecting a factor, it is important that you understand the ownership of the factoring companies that you are considering.
Clients often find an independent factor can provide them a more personal, relationship based service. However, this is not to everyone’s taste and some clients are seeking a more transactional service that they’ll manage on the internet. The independents in many cases are reliant on client recommendation for new business, rather than a bank network, and so it could be argued they have to be extremely centered on ensuring that their service is as strong as possible.
The size of the business enterprise that the client is coping with must certanly be considered, too small and you may face instability problems but with size comes the task of maintaining a personal service and relationship. The factoring market has factors at all stages along this spectrum and certainly one of our advisers can offer you more info in regards to the factors that maybe you are considering or those that would meet your requirements.
Another key aspect to think about is credit control or the collections service (if you require this service). With factoring, this service normally comes within the service although the way it is conducted may differ enormously. In certain organisations there would have been a credit controller specialized in your account such that you can replace your personal staff with that individual and save money. In other factoring companies the collections service can be extremely different with pools of staff chasing debtors so relationships are less apt to be developed with debtors.
In other cases, only the very best few clients are contacted by telephone by the factor. In some cases, the factor’s chasing is entirely handled by written automated letters and statements with the client retaining the responsibility to help make the telephone calls. This can be a satisfactory arrangement when you yourself have the resource to undertake the credit control and you may argue that this could cut costs on the expense of the service. In either case, as a possible client you need to know the amount of service that you can expect and the implications on the expense of the facility so that you may make the very best decision for the business.
Yet again, our advisers will have a way to provide you with guidance on the basis of the actual experiences of clients that we have placed with particular factoring companies.
Summary – How exactly to Pick a Factor
So to summarise, there are lots of aspects to think about when selecting a factoring company, who owns the business enterprise, how financially stable will they be, how can you be serviced and how will the collections be handled. Many factoring companies will have a way to provide you with case studies about existing users of these products that may be in similar industry sectors to you. They may also be able to put you touching existing clients that may let you know first hand about the quality of the service that they receive.
They are merely a some of the questions that you could ask but develop this will give you some assistance in making the choice. Our advisers are usually available to steer you though the procedure and our service is both completely independent and completely totally free for you yourself to use.