1. Understanding what facilities are available.

For example do you require bad debt protection, confidentiality, or credit collection services?

2. How much cash does the facility raise?

The effective level of funding is affected by a number of criteria set by the factoring company such as concentration levels, age of debt and funding limits. Beware the advance rate is not necessarily the percentage of advance you will achieve against your sales ledger

3. The cost of the facility;

There are two main costs involved in factoring facilities and even these can be confusing when you are trying to compare alternatives. Additionally there are other disbursements which are not detailed in the offer letters and do differ greatly. Beware of hidden charges.

4. The length of the agreement;

The initial cost of providing facilities to a new client is expensive for factoring companies and therefore they will wish to structure a deal which ensures you remain with them as a client for as long as possible. Therefore you need to consider very carefully with whom you enter an agreement and what costs are involved if you decide to exit the arrangement. Nearly all factoring agreements have a minimum agreement period and termination notice period

5. The security requirements;

What additional security is required, such as Personal guarantees and security over other assets?

6. The level of service and communication.

Clearly cost is important, but the price is what you pay and the value is what you get. So ask for contact details of existing clients and visit the factors premises and staff if possible to ensure you will feel comfortable with the staff and how they will operate your facility.

7. Collection procedures and cash allocation

This may seem unimportant, but depending on how diligent and efficient staff at the factoring company are in these tasks can affect your cash availability and charges significantly.

8. The Client Manager

The client manager is your link to resolving any issues or requirements on your facility. Therefore understand how they wish to be contacted and what authority they have with your facility. Also ask how many clients they look after.

9. Ongoing costs and breach of agreement

Most factoring companies require a level of audit and these usually involve a regular review of their security and your administration and paperwork. In addition to the cost of these visits ensure you understand what conditions they impose on you as part of their facility. If you do not comply with these then they are within their rights to reduce or stop payments if you have breached the terms and conditions of the agreement.

10. Speak with an independent broker.

You may have advisers or well intentioned friends, but this is a specialist finance facility and you need to speak with a broker who has credibility and is technically competent and who’s advice you can trust. Once you are comfortable with this person then they will help you through the process saving you time and money. A good broker should be easily contacted and be able to give you a free review of your situation. As a broker we only usually get paid on completion of a deal, so it is in our interest to ensure we find you the most appropriate facility and lender for your requirements.