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How do I choose between factoring companies in Scotland?

The services offered by factoring companies in Scotland vary considerably. It is therefore important for firms looking for additional financing to do their research and shop around for the right deal for them.

Look for someone you can talk to

Most firms need financing on a semi-regular basis. Therefore, it makes sense to look for a factoring company that is easy to approach and speak to.

As with all business relationships, communication is key to success. Look for a firm who is happy to speak to clients over the phone as well as via e-mail. If you need something quickly or want to arrange a loan that falls outside the normal parameters, you can actually speak to someone and discuss your options in full.

Look for a firm who is open about their terms and conditions

The best factoring firms are very open about their service and how they work. A firm who is hazy about such things on their website will be more difficult to deal with and may even waste your time.

It is a good idea to use a well-established firm. They tend to be the firms who offer the most flexibility. The fact that they have been operating in the industry for years is also a sign that their existing customers are happy with the service they offer.

Check you meet their criteria

All factoring companies in Scotland have certain conditions that the firms they lend to have to meet in order to qualify for financing. It makes sense to approach those firms who offer services for your type of business. Some Scottish factoring companies require the businesses they lend to to have been in business for several years. Others will not lend to firms who have had credit problems.

The best firms take a flexible approach. They will lend to virtually any business.

Understand how credit control will be handled

When a factoring company lends money, they do so against outstanding invoices. When the invoice is paid, the factoring company gets its money back. The fee for their service is paid and any money that is left over after that is given back to the firm the invoice is owed to.

This means that most factoring companies becomes involved with credit control. Should a customer not pay their invoice on time they will chase that customer up for the money. This means that they will be speaking to your customers to get the money that is owed.

In one way, this is good because it takes the pressure off you and gives you one less task to worry about. Of course, this is another reason you need to choose your factoring company carefully. You need to avoid those factoring companies who use heavy-handed tactics to get invoices paid.

However, not all business owners feel comfortable with this approach. The best factoring companies know this so will offer an alternative service called invoice discounting, which enables firms to retain control of their credit control process.

Following these tips will help you to choose between factoring companies in Scotland. You will get a loan that can be set up quickly and easily and does not cost too much money.

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NACFB - Helping Fund UK Businesses  Federation of Small Business