Once you decide to factor your accounts receivable, do some research first, to find the right factoring company for you. After that comes the application process and presenting the documentation the factoring company needs.
Doing Your Homework
As in any business transaction, you should deal with a reputable company, preferably recommended by a professional advisor or business associate. Do some research on the factoring companies you are considering and compare their quoted discount rates. You should be clear about the terms and conditions of the factoring arrangement beforehand. Ask any questions you may have before signing the agreement. You may want to consider using an experienced broker, that can find the best factoring company for your business.
The Application Process and the Documentation You Will Need
The application for getting started with a factoring company is normally a relatively short process that could take just a few working days. Your receivables should be properly documented, supported by the invoices to be factored, and your product must have been delivered and accepted by the customer, or your service completed, before the factoring company will purchase the receivables.
You will need your most current accounts receivable aging report, a sample invoice, and in some cases, your most recent financial statements. The factoring company may charge you a one-time fee, once you agree to their proposal, to cover administrative costs, filing fees, and other expenses.