How Do I Choose Best Seattle Factoring Companies?

How Do I Choose Best Seattle Factoring Companies? Seattle is home to 8 Fortune 500 companies, including Amazon, Starbucks, Nordstrom, and Microsoft. Other major companies headquartered in the region include Weyerhaeuser, Expedia, and Costco. Bellevue is also home to truck manufacturer Paccar. Boeing was headquartered in Seattle before moving its headquarters to Chicago.

Companies in the Seattle area use accounts receivable factoring to maintain working capital while driving growth. Invoice factoring provides companies with access to cash from newly generated invoices. Your factoring company buys your invoices, advances your money, and collects payments from your customers.

Seattle has excellent factoring companies that cater to all types of industries. Orange Commercial Credit has been providing factoring services since 1979, while Allegiant Business Finance has been serving companies in the Seattle area since 2003.

One of the most important things for any small business is cash flow. Most of the customers you look for pay their bills 30, 60, or even 90 days later. In the meantime, you still have costs to continue your business. Some daily and monthly expenses such as fuel, maintenance, and insurance cannot be postponed for that long. That is why many companies, including trucks, use a factoring company.

What exactly is factoring? And what is the best way to choose Seattle factoring companies for your trucking business? Here are some tips and tricks you should know.

Table of Contents

What is a Seattle factoring company?

A factoring company essentially buys up your unpaid invoices. Factoring is also known as debtor financing. Factoring companies pay you the invoice amount quickly, usually within 24 hours of invoice verification. Then they collect the same unpaid invoice balance from the broker’s client when they make the payment.

You can customize factoring based on your needs. Some business owners take all their bills into account, no matter how quickly brokers pay. Others consider only a few, usually for low-paid or as-needed customers.

Factoring puts money in your pocket so you can use it for payroll, fuel, and other short-term expenses. It also alleviates some of the administrative burdens of chasing down deposits. For that reason alone, many smaller companies take all their invoices into account.

Seattle factoring companies with resource x without resource

What happens if your customer pays the factoring company late or does not pay? The answer depends on the type of factoring you choose.

Seattle factoring companies can offer two types of factoring: with the right of recourse and without the right of recourse. If a resource factoring customer fails to pay an invoice, you must “buy it back” from the factoring company and request payment yourself. In other words, you are ultimately responsible for any default.

In the case of non-recourse factoring, the factoring company assumes responsibility for the claim and its collection. But be careful; check the fine print as there are some restrictions.

Some factoring companies only offer non-recourse protection if their customer goes bankrupt or become insolvent.
Invoices from high-risk companies with low or no credit scores cannot be counted.
Some companies may charge higher fees associated with non-recourse factoring.

Resourceless factoring can be helpful if you understand its limitations. Some factoring companies have their credit teams and may prevent you from working with customers with bad credit. Either way, a good factoring company should make a diligent effort to collect all the invoices you want to factor.

What does Seattle factoring companies do?

Factoring companies buy your bills and pay them immediately, minus a fee — usually a percentage of the bill. They then collect the outstanding invoice amount when the customer pays. It can be easier than getting a line of credit or a bank loan in several ways. Factoring with a broker can be beneficial for small businesses because:

Your credit score matters less than the credit scores of your customers and customers.
You will be paid immediately.
How much your “financing” grows as you process more invoices from your customers.
The more invoices you consider, the lower your rate.
Some factoring companies offer other back-office accounting services such as accounts payable and human resources management for a small fee.

A Seattle factoring company can become part of your corporate accounting team and manage the accounts receivable for you. This takes billing, billing management, and collections off your paper and allows you to spend more time booking paid work.

A good Seattle factoring company offers opportunities. They have no minimum number or monetary value of invoices that you should disregard; you can choose which one to take into account, they charge a fixed fee and there are no cancellation fees or long-term contracts.

What Companies Use Seattle Factoring Companies?

Almost every industry that bills customers can benefit from Seattle factoring companies. Here are some examples:

Construction companies and suppliers
Government agencies and contractors
Healthcare providers and medical device suppliers
Production
Oil and gas
Service providers (beauty salons, pet care, repair shops)
Technology and software
Telecommunications
All aspects of the transport and logistics sector

Virtually any industry with short-term ongoing costs that are impacted by cash flow or that needs accounts receivable support can benefit from invoice factoring.

How Much Do Seattle Factoring Companies Charge?

Seattle factoring companies make money by charging a fee, usually a flat percentage of each bill you bill. Rates generally range from 1.15% to 3.5% per month. This can vary depending on the type of factoring you choose and the number of invoices (and dollar amounts) for each invoice you factor.

It is essential to pay attention to the fee structure when talking to a factoring company. Some include additional costs for some services, including:

Transfer money
Operational costs
Billing fees

The most important thing to keep in mind is that the Seattle factoring company you work with must be transparent and clear about all these costs. Seeing unexpected hidden charges from your bills is a red flag to investigate. These fees come directly from your earnings, so you want them to be as predictable and reasonable as possible.

How do Seattle factoring companies help road haulage companies?

Most companies go bankrupt due to a lack of working capital or cash flow problems. While posting an invoice costs a percentage of fees, it’s generally worth the splurge. The time you would spend preparing bills, collecting bill payments, and managing paperwork could be spent carrying more loads and making more money.

The time you save by having someone else track your bills and associated paperwork can be invaluable. The more you grow, the more billing work you’ll have. The ability to outsource this to someone else keeps your cash flow healthy.

Advantages Of Seattle Factoring Companies

No matter how big or small your transport company is, invoice factoring can contribute to your success in many ways.

Faster access to payments: The factoring process provides faster access to cash. Freight billing allows you to cover short-term operating costs without waiting or worrying about costs.
Overcomes credit challenges: When evaluating invoices, a factoring company looks at the broker’s or shipper’s creditworthiness rather than their creditworthiness. That’s why you can still get quick access to cash if you have a credit default on your road freight business record.
Direct payments to fuel cards: The best factoring companies pay invoices directly to fuel cards and offer discounts to those in the trucking industry.

How do Seattle factoring companies qualify freight forwarders?

A freight factoring company will typically qualify freight forwarders based on risk and volume. They will evaluate:

Monthly invoice volume: The more business you do with them and the higher the invoice amount, the less you will be charged as a percentage.
Client diversity: Whether you’re handling freight for a single company or a small group of brokers or carriers, a freight factoring company will look at risk. A diversified customer base reduces this risk.
Customer credit risk: Companies assess the creditworthiness of the company you have invoices for, including how long it typically takes to pay your bills.
Advance Percentage: Factoring companies in the trucking industry can reduce their risks by forwarding only a portion of their invoices. For example, if you pay an advance of 85% of the bill instead of the total, you can get a better rate.

How do you choose the best Seattle factoring companies?

There are many Seattle factoring companies and choosing can be a challenge. The key is to choose the one that best suits your particular circumstances. Just as you would interview a new employee, ask your factoring company these questions:

How quickly will I be paid if I submit an invoice? The response must be within 24 hours.
Which invoices can I factorize and which invoices are not eligible? This may depend on your customers and your credit scores, so keep a list handy.
Can I take some invoices into account and not others? Normally you can, but be sure. Some companies require you to take all invoices into account.
How much can I borrow at once?
What are your factoring costs? It is preferably a fixed rate. Good factoring companies often offer discounts or low rates if you factor in more invoices.
Are there any other costs I should be aware of? (Money transfers, guarantees, etc.) Make sure these costs are clear and within your budget before signing any contracts.
Is there a long-term contract? If so, what is the term and what are the conditions? Are there cancellation fees?
What happens if a customer does not pay an invoice within a reasonable period? What is the deadline for customers to pay invoices? Do you charge an “alignment fee” if customers take longer to pay?
Do you need a backup account?
Are there factoring fees for transactions such as transferring money to my account? Are there minimum volume costs?
Do you offer to finance with or without recourse? Recourse loans offer lower rates, but you will have to repay payments if the customer does not pay. In a non-recourse loan, the factoring company assumes all risks if the customer does not pay and will charge higher factoring costs for freight.
How long have you been in business? Do you have experience working with freight companies my size?

5 Things to Look for in a Factoring Company

1. Industry experience

Seattle factoring companies come in all shapes and sizes. The first way to narrow the playing field when choosing a debtor factor is to find someone who understands your business model and the industry you operate in.

Partnering with a accounts payable factor who understands the unique characteristics of your business ensures that your ongoing factoring process runs smoothly. Don’t waste valuable time explaining traditional payment terms and/or day-to-day business procedures to a factor unfamiliar with your company’s business model. Select a financier who already knows your industry.

2. Flexibility:

The second thing to consider when buying Seattle factoring companies is the amount of flexibility they offer their customers. A savvy business owner should make sure to ask some or all of the following questions of potential factoring candidates:

Is there a certain period that I have to stay in the factoring relationship?
Do I have to sign a personal guarantee where I am personally liable for any unpaid bills?
Do I have to sell all my invoices?
Do I have to take into account the invoices of all my customers?
For a business just starting, is there a minimum number of invoices I need to consider? And if so, what are the sanctions if I do not meet the minimum requirements?
For a fast-growing company, is there a maximum amount I can finance?

3. Customer Service

In the business world, time is money. It’s a huge waste of time navigating a difficult phone system and being on hold for a long time. This can easily be avoided early on, during the research phase of selecting a factoring company. A good Seattle factoring company is available when your customers need it. During the sales process, pay attention to response times for email and telephone communications.

Also, note who answers your questions. For example, some Seattle factoring companies assign personal account managers to each other, their customers. Other companies have a team of employees who are responsible for each customer’s account. Regardless of how many people work to fund your business, prioritize choosing an invoice factoring company that offers the level of customer service you desire.

4. Stability:

More than ever, it is important for business owners to get financing from an established billing company. Just as important as finding a factor who understands your business model is just as important as working with Seattle factoring companies with a credible track record in the factoring industry.

One way to accomplish this task is to choose a factoring company that is affiliated with the International Factoring Association (IFA). Seattle factoring companies that are members of the IFA follow a strict code of ethics and business practices. Business owners interested in finding a reliable factoring company can view a list of factors through the IFAWeb site using the organization’s “Factor Search” feature.

5. Prices

Before jumping in blindly and talking numbers, it’s a good idea to have a general understanding of how Seattle factoring companies structure their fees. When a factoring company makes cash advances on debtors, it makes a legal purchase of the invoices at a discounted rate. This discounted rate may be a one-time fee. It can also vary depending on how long the factor has been on the bill, with the factor charging a certain percentage that corresponds to the time it takes to pay the bill.

In general, discount rates can be influenced by several factors. It includes the contractual obligation, the average monthly purchase volume, the average size of invoices sold, the number of debtors per account (customers) that will be accounted for, and the credit quality of those debtors. Variations in each will lead to potentially substantial changes in the fee structure.

There are plenty of other possible fees that can add a factor for additional services. Additional fees to cover the costs of checking accounts receivable and background checks, compiling and filing legal documentation, and filing liens. Some factors add administrative costs to postage, long-distance telephone calls, or computer time.

There are also fees associated with financing procedures, which identify the prices set for a same-day bank transfer or overnight transfer of money. Another cost class can be grouped into a “penalty fees” category, which can factor in misdirected payments, old invoices, or early contract termination.

Which factoring company in Seattle is the best?

Orange Commercial Credit

2415 Heritage CT SW, Olympia, WA 98502

For over 40 years, Orange Commercial Credit (OCC) has been helping small and medium-sized businesses across the country increase their cash flow through accounts receivable financing.

Industries They Serve

Business services
Production
Oil and gas
People
Trucking

Factoring amounts

$10,000 – $3,000,000

Allegiant Business Finance

Allegiant Business Finance is a factoring company based in Seattle. Located at 1126 34th Ave Suite #205, Seattle, WA 98122

Allegiant Business Finance is a Seattle-based factoring company that has been providing accounts payable factoring services since 2003.

Industries they serve

Business Services
Production
Oil and gas
People
Truck