Many companies that start using factoring often have questions regarding their customers.
How will they be treated? What if they pay me directly? What do I tell them? Here are some common questions and helpful answers.
I don’t want to sell all my invoices. Is that possible?
Yes. Most factoring companies will allow you to pick and choose which invoices to factor. Of course they must be ‘credit worthy” but the factor will help you decide which ones are in your best interest to sell.
Where do the payments get sent?
Your customers will mail payments directly to the factoring company. Any ‘reserve” will then be forwarded on to you.
What if the customer mails me the money?
This is common, especially on the first payment. Factoring companies will require you to forward them the check. In other words, you are not to cash it and write another check to the funder. This helps the factor keep track of each customer’s credit worthiness (as well as avoid fraud). Your clients will then be notified that they need to mail payments directly to the factor.
How do I know the factor will treat my clients well?
The factor is in business with you. They want you to succeed and continue to grow. They are not a collection company. They want to maintain your customer satisfaction just as you would.
What should I tell my customer? Will it look bad if I am factoring?
Odds are your client may already be familiar with the process and not really think anything of it. If for some reason they are not, you simply need to tell them that you have chosen to use an outside company to manage your account receivables.
Still looking for more information? Check out 5 Things to Know Before Applying for Factoring.