How to Switch Factoring Companies
Not all factoring companies are created equal – with a bit of research you can quickly determine whether the time and cost associated with switching is worth it and exactly how it’s done.
Let’s face it, most people resist change. We sometimes accept poor service because we think it’s too much trouble to make a change. For example, you’re unhappy with your factoring company. Perhaps they deliver less than stellar customer service, charge higher rates than competitors, or are not funding your invoices in a timely manner. You may think that switching companies is simply too complex, so you do nothing.
But switching factoring companies may not be as complicated as you think, if you’re prepared. Change is easier to make once you understand what it entails. Here’s where you should start.
1. Review your contract
There are important details you’ll want to pull out of your contract before getting started.
When does the contract end? How much advance notice do you have to give if you decide to end the contract early? What penalties do you have to pay for terminating the contract? Look for language such as guaranteed or non-compliance fees, early-termination fees and buyout fee. How do you notify the factoring company that you’re ending the contract – mail, email or phone?
2. Identify possible new factoring companies
Before you switch factoring companies, make sure that the new company is the best one for your business needs. Switching companies can be costly. Think of what’s important to your business and keep that central when choosing a new company.
Consider things such as how much experience the company has in your industry, how long it has been in business, their key business offering, how reasonable their fees and terms are, and who your primary contact will be.
Talk to people within each company so that you can make an informed choice. Make a choice
3. Talk to your current factoring company
You’ve reviewed your factoring contract, ask the factoring company what will happen should you switch companies. This is an important conversation because it could mean that you’ll be without financing for a short time while the old and new factoring companies are discussing how best to do the switch.
4. Start the switching process
- Notify your factoring company that you’re switching to another
- Arrange a buyout with the new company (the new company will look at things such as outstanding receivables, fees owed to the old company, termination and other fees.)
- The new company will reach out to the old one to initiate the buyout process. Both companies will agree to a switching date.
- Your new factoring company will buy the invoices, which means paying back the money you were advanced from the old factoring company, in addition to accrued fees. It will collect the fees from you.
- Make sure you get a detailed report from the new company, so you understand how it determined the buyout amount
5. Notify your clients of the change in factoring companies
Once the switch is complete, let your clients know that you’ve changed factoring companies, and how it will affect them. You’ll need to give them the new payment address and let them know they’ll be receiving a Notice of Assignment. People like to know “what’s in it for me”, so make sure to highlight the benefits of this new relationship for both you and your client.
Now that you know what it entails to switch factoring companies, why not give FundThrough a try. We are a modern, online factoring company that has removed many hurdles to conducting business efficiently, and our customer service is unmatched.