5 Tips to Impress Factoring Companies with Your Application | Behalf
5 Tips to Impress Invoice Factoring Companies with Your Application
If you are serious about factoring your company’s receivables, do your homework and pick a factoring company that’s a good fit. Receivable factoring is a major commitment. Once a factoring company purchases your customer’s receivables, they collect on your behalf. They become an extension of your business operations and a major part of your customer’s journey. You will want to choose a factoring company that handles your customers with care, especially when it is time to transition them into paying the factoring company. When you finally find the factoring company that fits your company best, apply.
Complete your factoring application carefully and accurately. Factoring applications are different than traditional loan applications. Your credit score does not play as much of a role in a factoring application as it would in a loan application. Still, invoice factoring companies are highly selective. Ideally, buying your company’s receivables is a low-risk transaction for them and your company has a high factoring volume. To determine your company’s fitness, they evaluate the legitimacy of your company and consider your customers’ creditworthiness. You should always be prepared to substantiate your claims because invoice factoring companies verify the information you provide. How you present your company and its customers could make or break your chance to work with a factoring company. This article offers 5 tips on how to impress invoice factoring companies with your company’s application.
1) Become an LLC or Corporation
Your company’s application stands a far greater chance of getting approved if your company is an LLC or corporation. Invoice factoring companies want to work with established companies with business savvy. Becoming an LLC or corporation, if your company is not already, gives factoring companies confidence in your company as a potential borrower. If you are already an LLC or corporation make sure you emphasize it throughout the application; it can only help.
2) Online Presence
Use social media to your benefit and build up your company’s online presence. Invoice factoring companies want to be sure that you’re a legitimate company and not a scam. The more active company social media accounts you have on the web, the better. Besides social media, invest in your website. Make sure it is SEO friendly and can easily be found by the factoring company you apply to.
3) Prepare Documentation
Invoice factoring companies do a thorough evaluation of your company and its customers. They verify the information you do give and if they do not find it substantial enough, they will ask for more. Prepare records and other documentation you believe will support your application further and possibly speed up the process. Your documentation should be completed carefully and include all important information and necessary details. Try to avoid documents with casual language that make references invoice factoring companies will not understand. For example, nicknames for customers or any other unofficial identifiers.
4) Communicate with Customers
You need to make sure your customers are in agreement about the services on the receivables you submit for factoring. Invoice factoring companies cannot factor receivables, when merchants and customers disagree on whether or not they are complete. If customers do not verify an invoice you submit for factoring, the factoring company can reject it. Invoice factoring companies pay attention to your customer relations. They want to see that the company is on good terms with its customer base.
5) Lead with Best Customers
A major mistake applicants make is they submit the wrong type of customers for factoring. Invoice factoring companies will most likely check your customer’s creditworthiness. Make sure the customers you include in your application have large accounts, good credit, pay on time and demonstrate good spending habits. You want to lead with your largest financially stable customers. They give the factoring company confidence that you and your customers pose little risk.
Take your time with your factoring application; factoring companies will take their time carefully reviewing it. Your customers do not have to have perfect credit scores, but you do want to make sure you present your company and its customers well. The better your application the more likely it will get approved and get your company better rates. Factoring is notoriously expensive, so you want to take the extra time to ensure you get the best rates you possibly can for your company.
There is an alternative financing option that is more affordable and easier to secure. Most likely you are considering factoring because you have slow or non-paying customers and your outstanding receivables are starting to accumulate. Instead of selling your receivables, consider offering your customers a business line of credit so they can always pay you on time. Behalf’s business line of credit can increase your customer’s purchasing power up to $50,000. There are no hidden fees and affordable rates for both your company and its customers. Your business customers can make larger, more frequent purchases when they use the line of credit to pay you, the vendor. You get paid within 1 day and your customer can customize their payment schedule and extend payment to Behalf up to six months. The funds on their line of credit replenish as they pay, giving them constant access to working capital.
Learn more about how Behalf is transforming the way business buy and sell here.