Term of Contract and termination clauses. A typical contract with a factoring company runs 12 months or more. After the initial term, contracts can be terminated - there are no set rules, read carefully (varies from notice periods to contract anniversary). Termination is always subject to full repayment of the funds.

• Trial period. Some factoring companies have a trial period when you begin using their services: "if you don't like it", you can end the contract after the first few months. Termination is always subject to full repayment of the funds.
  
  
• Reputation and references. The factoring company will be a critical interface with your customers. Make no compromises. Work with a reputable firm to eliminate all risk of negatively influencing your customer relationship. Ask for references. Check if the factoring company is a member of the Factors and Discounters Association.
  
  
• Personalized service. Particularly if you are a small company, make sure to have a customer service team available for you.
  
  
• Exports factoring capability. If you export make sure the factor has its own network, or affiliate partners, in your customer's country to provide on the spot collection.
  
  
• Bad debt protection. Some factoring companies offer this additional service, some don't. Ask!
  
  
• Chose the factoring company according to your customer profile. Whether your customers are other businesses, or individuals is an important criteria in choosing your factoring company.
  
  
• Transfer restrictions of your outstanding invoices. Make sure there are no existing contractual arrangements disallowing the transfer of your outstanding invoices to a factoring company. For example a loan that is secured by your outstanding invoices.
  
  
• Information requirements to open an account with a factor. The factoring company will ask you to fill in an application form and provide additional documents and accounting statements you would also typically give to your your bank when taking out a loan. Be prepared to give a detailed overview of your customers, and if you request bad debt protection, their risk profile.

Use this information and you will get the best from your factoring arrangements. We can help you get in touch with the correct factoring company for your needs. Click here to use our brokerage services to get quotes.