Factoring companies: which are good? What to look out for?

You should ALWAYS read any contract over very carefully. If you don't agree or understand something in a contract, then either change it or don't sign it. That is true with any contract.

Factoring can help a business fill a financial gap and grow without accumulating any debt. Factoring can enable a company to grow when they might otherwise would need to hold back. For most companies, factoring is not necessarily a long term solution for financing your business. When a business is new, finding a lender that will give you a line of credit sufficient to finance your growth may not be available. Most banks want to look at least a 2 year history before extending a good line of credit. Some may offer funding if you can show a lot of assets, such as real estate. But, that is not available for most starting out. I would consider factoring as a means to an end. If everyone who started a business had enough cash to finance their growth for 6-12 months, there would be few who would start business. But, if you do decide to factor, make sure you read every single word of the contract before signing the contract. There can be some clauses in the agreement that may not be in your best interests.

 

I was told this is written into the contract to protect the company from fraud and stolen money. Shouldn't be an issue if I don't do anything criminal right? Just wanting to know if I am giving a factoring company control over my life.