Choosing the right factoring company comes down to ten measurable factors, from credit limits and advance rates to funding speed and reporting clarity. This self-assessment walks through each one, so you can score your current factor and see exactly where the gaps are.
Answer the ten questions below.
- Does your factor offer higher credit limits on your key customer accounts?
- Does your factor offer a high enough advance rate?
- Does your factor release your reserve balances in a timely manner?
- Does your factor provide same-day funding?
- Are your factor’s reports easy to understand?
- Do you have a dedicated relationship manager?
- Does your factor respond quickly enough when you need answers?
- Does your factor have real trucking industry expertise?
- Does your factor offer a free load board?
- Does your factor offer fuel cards and savings at the pump?
If you answered yes to all ten questions, congratulations. Your factor gets an A+. If you answered no to two or more, here is what those gaps are actually costing you.
Higher Credit Limits on Key Customer Accounts
If you have a key customer that accounts for 30 percent or more of the money owed to you at any one time, many factors will not consider you. For example, if your total book of business is $100,000, a factor with a 30 percent limit will only consider funding $30,000 with any single debtor. Or the factor may impose a concentration cap on a single debtor and refuse to purchase invoices over that cap. Without higher credit limits on key accounts, your cash flow is limited, causing you to miss out on business opportunities. Or you may have to borrow money from other sources or invest more of your own money to take advantage of those opportunities.
High Enough Advance Rate
It is important to have as high an advance rate as possible to get the most financial leverage from your accounts receivable. When advance rates from a factor are too low, your liquidity is constrained and you may not have enough cash flow to operate or grow. The result: you may lose out on opportunities that require additional cash flow or miss paying operating expenses on time.
Timely Release of Reserve Balances
A key benefit of factoring is a quick boost to your cash flow. Without timely release of your reserve balances, cash flow is strangled, negating the benefit of factoring in the first place. The result: you do not have the working capital you need to keep operating.
Same Day Funding
Same-day funding gets you cash within 24 hours of submitting your invoices. Without it, you may not be able to make payroll on time or meet urgent operating costs such as fuel, truck repairs, and insurance. You could lose vendors, employees, and customers, and possibly your business.
Easy-to-Understand Factoring Reports
Without them, you may not get the right data to analyze your financing, or you may misinterpret results. For example, you need to know which customers are delinquent, how delinquent they are, and by how much. If you cannot quickly find the information you need, you are wasting time and risking your business.
Dedicated Relationship Manager
Without a consistent, dedicated manager, you will not get the kind of individualized advice and tailored solutions you deserve. A true long-term partner understands the nuances of your business and your particular challenges so they can respond more quickly when something happens. When you are in a cash flow bind, you do not want to explain your company all over again to a new contact.
Respond Quickly Enough
Running a business means you are pulled in many directions. You need fast funding answers so you can move forward and make the next decision. You need a factor who understands your funding urgency: paying drivers, buying fuel, making repairs, and meeting day-to-day operating expenses. A factor who takes too long holds up progress and could cost you opportunities. You want a partner who understands the issues quickly and can help you through difficult situations.
Trucking Expertise
A factor who does not understand the transportation industry cannot provide the kind of business insight that helps you succeed. You want a factor who understands the challenges, situations, opportunities, and deadlines you face, one who keeps up with technology and regulatory changes, understands invoicing nuances and the difficulty of gathering documents from drivers, and works with you to find a solution.
Free Load Board
If you are paying for a load board or avoiding one due to cost, you are missing the opportunity to eliminate dead-end runs and increase your profitability. A funding partner who offers a free load board is one who also looks out for your business needs and helps increase your revenue.
Fuel Cards* and Savings at the Pump
You miss out on the advantage of saving up to 15 cents per gallon, as well as flexibility in your card management. That money could go toward equipment repairs, technology upgrades, and other operating needs instead.
Did your factor flunk? Call Charter Capital and see how having a top-of-the-class factor can help you succeed.
*Fuel cards from Charter Capital are not available in California.
