When Not to Factor…
Don’t Factor If…
1. Don’t factor if you don’t need the money… It may seem a little silly to say this but factoring your accounts only to have the money sit in your bank account unused is not wise. By the same token, do not use a factoring company that requires you to factor all your receivables all the time. The result of that relationship will be that you have costly money sitting in your bank account unutilized.
2. Don’t factor if you will be required to pay a termination fee…Some firms require an application fee, audit fee, and termination fee. So, no matter what the rate is that you get quoted, the actual cost is much more. Imagine if you went to the hardware store and a man at the door required you to pay to enter the store. Then, imagine he required you to pay to leave the store. You would think this was pretty silly.
3. Don’t factor if you don’t understand what all the charges are…The reason we ALL hate to buy a car is that we always feel like we are being taken advantage of on some level that we know we do not understand. If you don’t know what it will cost you to factor a certain invoice for a certain number of days and no one can explain it to you in terms you can understand…leave.
4. Don’t factor if you have selected the lowest bidder off the Internet…You usually get what you pay for. Talk to your banker. Get a referral from someone who knows what they are talking about. Ask people you trust. I just read an article about a guy who was selling fake Picasso prints on eBay. Like you, I am pretty upset with the crook selling the prints. BUT, I am also upset with the folks who bought the prints. Why do we make it so easy for people to dupe us? If it seems too good to be true…well you know the rest.
Categories: Factor Talk
