So, you have chosen a factoring company and submitted your application and all required documents. The factor has approved your application and performed all necessary checks on you and your customers. You are ready to move forward with a contract. What do you do next?
Before Signing Your Contract...
Before your contract is signed, there are a few things you may want to look for in the document and discuss with your chosen factor. The main questions we see at this stage deal with contract length, minimums, and rates.
How Long is My Contract?
While this can vary from company to company, at UC Factors our initial contracts typically cover 6 months. This means you’re committed to factoring invoices with us at your agreed upon rate and monthly minimum for a minimum of 6 months.
However, if your contract goes well and both parties are happy with the business relationship, you can factor invoices with UC Factors for as long as you like! At this point, your contract will be automatically renewed every 6 months to a year depending on the agreed upon terms.
If you ever wish to cancel, most factors will require a 30 to 90-days notice, depending on terms. This variance usually depends on the size of your account. The larger your account is, the more notice the factor will need before you terminate your account.
Is There a Factoring Monthly Minimum?
While each factoring company is different, most will require you to factor a minimum amount. This can be monthly or annually, but it will be included in your contract that you must factor this amount or be responsible for the difference.
However, the minimum depends on each individual account so there is no need to stress if you are a smaller company who is worried you may not be able to meet a minimum.
Some are as low as $5,000 a month for a smaller account. Other accounts may see their business fluctuate seasonally so an annual minimum works better to account for on and off seasons.
At UC Factors, we will work with you to determine what minimum works best for you and your customers. While a minimum is required, we never want to make it unattainable or difficult for our clients to manage.
Will My Rates Ever Change?
Other companies in the factoring industry tend to base their rates on the credit of the officers of the company.
However, at UC Factors we don’t run personal credit checks on members of the company. We perform background checks, but we do not perform credit checks when we are determining the rates for factoring for a new client.
While we can’t speak for every company in the industry, at UC Factors, once your rates are set, they’re set for the most part. We will quote you a rate during the proposal process and once you sign the contract, that will be your rate while you work with us.
However, sometimes there will be exceptions to this rule. While we try not to change rates, we do reserve the right to do so if the administrative duties for an account become too high. Raising a rate because of this, however, is few and far between.
For the most part, the only changes you might see is a rate decrease upon contract renewal and this is usually because the volume your account provides is substantial enough to warrant a decrease.
After Signing Your Contract...
After your contract with your factor has been signed, you are ready to begin factoring! However, you may still have some unanswered questions about how to begin, how you get paid, and more. We answered some of the more common questions clients have when they begin factoring invoices.
How Old Can My Invoice Be?
When you first begin factoring, we recommend you only use new invoices, not ones that have already been sent to customers. This helps keep a positive relationship between you, your customer, and the factor.
Most factors also, for the majority of cases, only purchase invoices within terms. If the terms of the invoice is 30 days, and it has aged beyond that time period, it will be considered ineligible and we cannot purchase it.
How Do I Get Paid for My Invoices?
You are ready to factor your invoices and begin reaping all the benefits invoice factoring has to offer, the main question new clients have is “how do I get paid for my invoices?
After UC Factors has received the invoice along with all the proper documentation (bill of sale form, proof of service, etc.), they will be able to begin the process of actually factoring the invoice. This process includes:
- Check approved credit on your customer
- Making sure the invoice is billed properly
- Make sure all information provided is correct and matches customer records
- Process and fund the invoice
As long as all your paperwork is in order and present, an invoice should be processed the same day that you send it in. At UC Factors, we make an effort to fund our clients the same day, provided they give us the correct paperwork to start with.
After your invoice has been factored, your customers will then pay the invoice as usual, with the exception that they send the payment to UC Factors instead of directly to you.
While you may have many questions as you begin the process of invoice factoring, it does not have to be something that is difficult or confusing.
Any good factor will be able to help walk you through the process and answer any questions you have to make you feel comfortable.
As long as you are working with a good factoring company and have all the correct paperwork, the process of invoice factoring should be smooth and pain-free. Once you begin, you will be able to see all the benefits of factoring including, increased cash flow, right away!
Are you interested in learning more about factoring companies and which one is right for your business? Take a look at our guide on how to choose the right factoring company here: