When you fill out a quote form for us, we receive your request and shop around to find you the best rates and services to meet your needs. It seems like a simple concept, yet we were appalled to learn that some factoring companies take advantage of their customers. It all boils down to one thing: read your contract.
In this post, we’re going to walk you through an actual contract. We’ll point out common issues so you know what to look out for. The contract we’ll look at is for 90 days, but the issues are in contracts for a variety of terms.
One of the things to look for is how far in advance do you need to give notice if you decide not to continue with the company for any reason. In this contract, it is required to give notice in writing 90 days before the end of the contract.
But wait! You say. Isn’t the contract only for 90 days? Yes! This contract requires that you request to end the contract the same day you sign it, or the contract will renew for another 90 days. Not only do you have to give it in writing, but the company must acknowledge it in writing. This happens so infrequently that written into the contract is language assuming that it will become a six month contract. Some companies have even claimed that they’ve never received a written request, so people have been stuck with a renewed contract.
Another thing to look for is any exit fees. In this instance, it is either the previous 90 days’ worth of profits or $1,000, whichever is greater. When you choose to end the contract, be warned that some companies may not take it well and choose to treat you and/or your customer less than professionally.
Next, look for any other hidden fees. As one person found out the hard way, some contracts include a section that states if any legal fees are incurred, you would be responsible for them. Another hidden fee to look for is if they can deduct from your reserves. In this contract, it states they can deduct 3% each month unless you ask for it first. It further states that if someone sends you a payment instead of them, and you fail to forward it within five days, they will charge 15% of the amount the first time, and 25% after that, plus any other costs they may have acquired. Should you choose to access your reserves, they may charge you a fee for that, too.
Look for any rate changes. As a general rule, good factoring companies will lower your rate the more you factor with them. Since we don't trap you in a long-term contract, if you decide to factor more, we negotiate the lower rate for you, and it will take effect quickly. Other companies may accept to factor you for more, but if you don’t negotiate before the deadline and receive written confirmation, you will be factoring more at the same higher rate.
This could all be summed up by one thing: read your contract. We cannot express that enough. You are welcome to reach out to us, and we will look it over with you. A little of your time could save you money and years of headache.
Before we end this, a quick thought on contracts: The longer it is, the more likely it is that the company is attempting to hide something you won't like. The issues we’ve mentioned here are squeezed into just half a page in this 90 day contract. On the flip side, if your contract is only a page long, there isn't enough information, and you should be suspicious.
Or you could just do business with us. We pride ourselves on great customer service. We work for you, so we'll treat you right. Request a free quote or call (214) 718-6999 for more information.