10 Good Questions to Ask Before Signing an Invoice Financing Agreement

Finding the right lender for your company can be a difficult task but arming yourself with the right questions could turn that new financing arrangement into a beneficial and long-term relationship that really helps your firm grow. Here are 10 questions to make sure you know the answers to before signing an invoice financing agreement:

1. How many years has the lender been in business?

You want a stable and known company that has been around and structured lots of deals so that you know they can work with you and smooth over any issues.

2. Is the company a broker or a lender?

Anyone can hang a shingle and say they are a lender while passing your file around to find you a deal. A real lender will have an interest in your company and be able to offer the best rates without upcharges or broker fees.

3. In simple and plain terms, what are the discount fees and what other fees are charged?

If it takes a major in math to figure out your APR then they are hiding fees.

4. Do they have experience in your specific industry?

Knowing your industry, the billing cycles and the issue that may pop up is a key to building a successful partnership with a lender.

5. Can I finance only specific invoices or specific customers or do I have to finance all of my invoices?

This flexibility is really important to your cash flow. If a lender is going to impound all of your revenue in their lockbox and charge you fees or hold back funds, the situation could become more of a hindrance than a beneficial partnership.

6. Is there a term for the contract or a termination fee?

If you find a better deal or grow out of the terms of the arrangement, you should be able to get out of the contract without owing any money or having to stick around and be held back for a period of time.

7. Are there monthly minimums?

Many businesses have periods where they are flush with cash and don’t want to pay interest to borrow money they don’t need and they should not have to.

8. Do they file a UCC and if so, when?

This is a standard clause in many invoice financing arrangements but you should be aware that a UCC is a public record and your new lender should not be filing a lien until they have actually sent you funds.

9. What is the maximum line of credit and can it be increased?

This speaks to your ability to grow with this lender and have a flexible relationship that serves you, the borrower. If a credit line is fixed and there is no room for growth then you could be handcuffed and find yourself in an inadequate situation in the future.

All lenders ought to be able to put you in touch with a couple of their current borrowers that can speak to their experience with the lender.

Every new financing relationship should be fruitful and beneficial to your business. Asking the right questions upfront puts in place expectations that all parties can live by going forward.

About Payplant

Payplant provides growth financing for entrepreneurs, by entrepreneurs. Its Pay Me Now^TM digital invoice-financing service provides cash to businesses when their customers pay too slowly. Payplant helps businesses with PO and Invoice Financing, Asset Based Lending, Term Loans and Customer Financing products. Payplant works with companies that don’t currently qualify for traditional bank financing, have grown too quickly for their current lender or are at the point in their evolution where an influx of working capital can elevate their business to achieve rapid growth. Payplant delivers fast and reliable funding, at very attractive rates and is completely on demand. For more information, visit www.payplant.com.