Why Can’t I Have Two Factoring Companies?
Invoice factoring is a fantastic financial tool that can help your business grow and thrive. Because of this, you may be wondering if having two factoring companies may provide even more benefits to your business. Or, you may be wanting to switch factoring companies and are wondering if you can have two at once. However, having two factoring companies is not possible.
Why Two Factoring Companies is Not Possible
- Factoring contracts
Factoring contracts contain language that prevents a client from working with more than one factoring company at once. This is included because of risk: there have been instances of businesses illegally attempting to sell the same invoice to two different factoring companies to try to increase their cash, creating a fraudulent invoice.
In this scenario, factoring companies now encounter cumbersome legal processes. And so to avoid this risk, it is written into the contract to only have one factoring company.
- UCC Filings
UCC filings, meaning the Uniform Commercial Code, is a set of laws that regulate commercial transactions in the United States. When receiving funds from a lender, a UCC-1 will be filed, meaning that the lender has a security interest in the company that is being lent to, aka the debtor.
A company can have multiple UCCs. However, the collateral described and the order in which one files the UCCs takes on much significance in priority. And any factoring companies will not want to be second-position or further down, as this creates unwanted risk. With these circumstances, finding a second factoring company is not possible.
Learn more about how factoring companies buy accounts receivable.
Switching Factoring Companies
If you are currently unsatisfied with the service that your current company provides, instead of attempting to take on two factoring companies at once, switching companies can prove to be a much better option.
Why Might I Want to Change Factoring Companies?
When a factoring company you are working with is beginning to not meet your expectations, starting the process of switching companies may make sense. But what might be some problems that create the need to switch?
- High fees and hidden charges
- You are getting too big for your current factoring company
- Unsatisfactory customer service
- Lack of flexibility
- Delays in funding and customer credit checks
- Poor credit assessment of your customers
- Payment terms don’t match your industry standards
- Limited recourse options
Any of these problems, as well as others, might make you begin to consider switching companies.
You can read what makes the best non-recourse factoring company.
How Do I Change Factoring Companies?
When you are unsatisfied with your factoring services, it may be time to switch your A/R factoring company. When making this change, there are many things to be considered so that the process can be completed as smoothly and as stress-free as possible.
- Review your contract
Review your contract with your current factoring company and the conditions of termination to ensure that you are fully informed on what will be involved. There should be a termination or buyout agreement section in your factoring agreement.
- Understanding the costs to leave your current factoring company
When switching to a new factor, your factoring contract may contain termination fees that you should review and understand before making the commitment.
- Research new factoring companies
As you navigate this transition between factoring companies, it is important to research and evaluate new factoring companies and find one that suits you.
- Notifying your current factoring company of the change
Once you have decided to move forward with the new factoring company, give written notice to your current factoring company about ending the agreement. This is important to avoid any penalties or disputes.
- Communicating with your customers
Let your customers know that the change is happening. Give them a start date and any necessary payment change details.
- Work with both factoring companies to transition
In order to create a smooth transition between the two companies, clearly communicate between both factoring companies. Make sure any necessary documentation and information is provided and exchanged.
You can also read why my customers send payments to my factoring company.
Learn more about what invoice factoring means.
Why Choose Bankers Factoring?
When looking to switch factoring companies, Bankers Factoring is always there for you. With over two decades of experience and counting, the owner-employees of Bankers Factoring care about your business as much as you do. We intimately know the ins and outs of factoring, and with our expertise, we are able to provide you with the best service possible.
See: FactoringClub.com Selects Bankers Factoring as Best of 2023.
The Benefits Of Working With Bankers Factoring
Working with Bankers Factoring, we will provide you with all the advantages that invoice factoring provides, and our decades of knowledge and experience in funding entrepreneurs is made available to you.
- Accessible and simple approval process-not time consuming
- Same-day cash advance after approval
- Low factoring rates and zero hidden fees
- Rates and fees that drop as you grow
- Easy-to-understand agreements
- Bad debt protection and no credit risk
- Security and peace of mind
- Access to immediate working capital
- 24/7 online reporting
Learn more about why work with Bankers Factoring.
Bankers Factoring also uses a special type of invoice factoring called non-recourse factoring. This type of factoring means that Bankers Factoring takes on any credit risk and protects your business from non-payment.
What is Bad Debt Protection with Non-Recourse Factoring?
There are two types of invoice factoring: recourse, and non-recourse. Bankers Factoring uses non-recourse factoring, meaning we take on the credit risk for you, protect you from bad debt, and absorb the risk of non-payment. With non-recourse factoring, we are able to create safety, security, and peace of mind for your business, allowing you to rest easy.
Please read understanding non-recourse factoring.
The Benefits of Non-Recourse A/R Factoring
With the possibility of non-payment from your customer from circumstances like your customer filing for bankruptcy, insolvency, or protracted slow pay, your business is at risk. Non-payment can be unpredictable and potentially dangerous for the financial health of your company.
Thankfully, since Bankers Factoring uses non-recourse factoring, we will take on this risk of non-payment, and if this scenario occurs, we will absorb this loss, providing bad debt protection. Any credit risk is deflected off of you, providing true security for your business. You will no longer have to worry about the possibility of non-payment, enabling you to focus on aspects of your business that need more attention.
With non-recourse factoring, your source of cash flow is safely guaranteed, providing your business with the working capital it needs to grow and thrive.
Learn more about the benefits of non-recourse factoring.
Whether you are a start-staffing company or own a trucking company, Bankers stands ready with fast and safe working capital turning your outstanding invoices in same day cash flow.