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3 Misconceptions About Factoring

Posted by in General Information

Every single day, thousands of businesses turn to factoring to improve cash flow. In fact, companies have relied on factoring for hundreds of years! Still, far too many business owners subscribe to misconceptions about factoring their invoices.

Concept of busy multitasking businessman at work

Below, the experts of RMP Capital clear the air.

Misconception 1: Factoring is designed to help failing businesses.

This couldn’t be farther from the truth! Factors don’t lend money; they purchase invoices at a discounted rate. Factoring is designed to provide funding to businesses that are rapidly growing, not those that are declining.

Misconception 2: Factoring is costly.

Compared to the alternatives, factoring is actually an affordable way to fund your business. Factoring companies generally keep rates in-line with or less than what you’d expect from a bank. Of course, the cost to you will depend on your monthly invoices.

Misconception 3: Factoring companies will harass your clients.

At the end of the day, we want to help your business succeed. Sometimes we will need to reach out to your clients with professional and polite reminders when payment is due. A factor is not a collection agency; if we are unable to collect on one of your factored invoices, we’ll reach out to you to discuss the problem.

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