A business relationship with a factoring company can be long-lasting – or not. That’s why it is important to understand how a factoring company can stand out.
We don’t review all companies available on the market. We picked some of the most popular, based on online search history, identified important metrics, and set out on a search for a better provider. Once a better company was found, we signed them as our partner. This site is an explanation of why we think the number 1 company on the list is the best of our top 5. To keep this content free, we receive commission from top company on our list.
We identified the following as the most relevant comparison criteria:
- Google Reviews: an important metric that provides insights into customer satisfaction. We used each company’s Google review to identify how their previous or existing customers rated their experience with the product. Google reviews are rated on a scale of 0 to 5. We converted the exact Google rating into absolute points. For example, if a company has a Google review rating of 4.7, they received 4.7 points.
- Non-recourse reserves: how a factoring company approaches the most popular option for long-haul carriers. We examined the fine print, looking critically at their reserve policies. A large reserve requirement can take up a significant portion of a carrier’s profit. If a non-recourse contract does not require reserves, it received one point. If company requires a reserve for non-recourse or didn’t provide that information- it receives 0.
- Minimum Volume Requirements: these potential limitations can impact a long-haul carrier. If a factoring company does not have these requirements, we added an additional point to their score.
- Contract Length: the flexibility and length each company requires with their contracts. We assigned 1.2 base points to each company. For each required month of a contract’s length, we subtracted .1 from the base points. For example, a company with a 60-day cancellation policy starts with 1.2 base points. Sixty days is the equivalent of two months. We subtract .2 points from the base, giving the company with one total point for contract length. If we discovered discrepancy between sales pitch and contract samples we’ve obtained- company receives 0.
We should mention that in case of TBS, there is conflicting information. They are claiming mont-to-month contracts. Though in the contract we’ve obtained- it’s clear 12 months term. So, we didn’t add any points for them for the contract length.
- Rates: the rate a factoring company charges for their non-recourse converge. For rates quoted between 2 and 5%, we added a point.
- Customer Service: the experience our reviewers had with each company’s sales representative. A positive experience is worth one point, based on our reviewer’s judgment. We analyzed the representative’s sales pitch, reliability of information provided, and general pushiness towards products we did not want. We also subtracted 1 point for discrepancy between sales and contract sample we’ve obtained.
- ACH Services: the cost to use direct debit services. If a company offers ACH services for no costs, they received .3 points.
We totaled each company’s score converting highest to a base score of 100%. The rest were scaled as a percentage of the highest point count. How does this work?
Let’s say the company scoring the highest had 9.8 points while the second highest score was 9.5 points. The top company’s score is converted to 100% which equals 10.0 score. The other companies’ points are divided by highest point count of 9.8 and multiplied by 10. For the runner up, its 9.5 points are divided by 9.8, and multiplied by 10 (expressed mathematically as 9.5/9.8*10=9.69). This number is rounded to the nearest tenth (9.69 = 9.7).
Note: It is impossible to objectively assess the extent of a factoring company’s non-recourse coverage. This criterion is left out of the calculated rating, but we include the details we found through our research.
|No reserve for non-recourse||1||1||1||0||0|
|Free ACH possible||0.3||0.3||0||0||0|
|Estimated rate 2-4%||1||1||1||1||0|