What Questions Should I Ask a Factoring Company?
Walking into the conversation with the right questions puts you in control and quickly separates the straight-shooters from the slippery ones. Here’s a practical checklist to bring with you. A good factor will answer all of these clearly and without hedging.
On cost and fees
- What is your factoring fee, and exactly how is it structured — flat, or does it increase the longer an invoice is unpaid?
- What is the advance rate I’d get, and what determines it?
- What is the total, all-in cost on a real example invoice, including every fee?
- Are there setup, application, wire/ACH, lockbox, credit-check, or monthly minimum fees?
On the contract and commitment
- Is this recourse or non-recourse factoring? If non-recourse, exactly what does it cover and exclude?
- How long is the contract term?
- Is there a monthly minimum volume? What happens if I don’t meet it?
- What notice do I need to give to cancel, and are there termination fees?
- Does the contract auto-renew? How do I opt out?
On how it works day to day
- Do I have to factor all my invoices, or can I choose which ones (selective/spot factoring)?
- How fast will I be funded after submitting an invoice?
- How do I submit invoices, and what supporting documents do you need?
- When and how do I get my reserve back?
On your customers
- How do you handle contact and collections with my customers? (This protects your reputation — listen closely to the answer.)
- Do you check my customers’ credit, and will you tell me if you see a problem?
- Will my customers be notified, or do you offer non-notification factoring?
On fit and trust
- Do you have experience with businesses in my industry?
- Can you provide references from clients like me?
- Who is my point of contact, and how do I reach a real person when I need one?
The way a factor responds to these questions is as informative as the answers themselves. Clear, patient, transparent responses are a great sign. Vagueness, pressure, or annoyance at being asked is a warning. You’re choosing a long-term partner who’ll touch your cash flow and your customer relationships — it’s entirely fair to interview them thoroughly before you commit.
Roy Brooks and American Commercial Capital, LLC, has provided invoice-factoring services to Houston-area small businesses since 2003. We work with businesses in San Antonio, Dallas, Austin, Fort Worth, Beaumont, Port Arthur, Corpus Christi, and other nearby Texas cities. If you’d like straight answers to every one of these questions, give us a call at 713-227-3863, contact us here, or fill out our free, no-obligation quote form.
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What Questions Should I Ask a Factoring Company?
Walking into the conversation with the right questions puts you in control and quickly separates the straight-shooters from the slippery ones. Here’s a practical checklist to bring with you. A good factor will answer all of these clearly and without hedging.
On cost and fees What is your factoring fee, and exactly how is it structured — flat, or does it increase the longer an invoice is unpaid? What…What Are Hidden Fees I Should Watch Out For?
This is exactly the right thing to be suspicious about, because the difference between a fair factoring deal and a frustrating one often lives in the fine print. A reputable factor is transparent; your job is to make sure you’re working with one. Here’s what to look for so nothing catches you off guard.
Ask about each of these specifically, even if the factor doesn’t bring them up:
…Is There a Minimum Revenue Requirement for Factoring?
If you’re a small operation worried that you’re “too small” to be taken seriously, take a breath — factoring is one of the most accessible forms of business funding out there, and many factors specifically serve small companies.
The honest answer is that requirements vary by company. Some large factors prefer sizable clients and set monthly minimums that can feel out of reach for a small business. But…
