Invoice Factoring Question - Are Contracts Required?

You will need to sign a contract with any factor with whom you do business. Policies differ from one company to another. Some will allow you to only factor those receivables that you wish. Others require you to factor all of your receivables. Some have a minimum amount that you must factor with them and others don't. You need to read the contract very carefully before signing.

 

You have to sign a contract and agree to sell all invoices to some or all (depending on the factor) of your customers for as long as you need the service. Many require you to stay with them for a minimum period of time (6-12 months), but some do not if you agree to pay a set-up fee.

 

Many brokers also offer quick pay now. Almost every time it is significantly lower than the rate the factor company charges. Try not to use any of these services at all, in the beginning it may be necessary and from time to time you may have to, but try your darndest to be able to wait to collect your money.

 

Usually my brokers are in the 2-3% range. If it's 2%, I usually take the money. If not, I just wait the 30 days or so it usually takes.