How To: Factor

Good Questions

Get answers to the following questions before doing business with a factor:

1. Does the factor require a minimum dollar amount of monthly accounts receivable?

2. What will the advance rate be?

3. What are all the fees charged? What is the interest rate?

4. Must you sell the factor all your receivables?

5. What is the length of your agreement?

6. Does the factor buy the accounts receivable with or without recourse?

7. Will the factor help you check the creditworthiness of potential clients?

8. Will the factor monitor existing customers' creditworthiness and help track the aging of receivables?

9. How long does the factor hold reserve money after an account receivable has been paid?

Jan Norman has specialized in small-business coverage for 10 years. Her new book, What No One Ever Tells You About Starting Your Own Business (Upstart Publishing, $17.95, 800-245-2665), is now in bookstores.

Contact Sources

American Receivable Corp., (800) 297-6652,

Star Capital Inc., (888) 421-STAR,

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