Many companies, from large to small, call factoring companies for working capital and often the topic of term contracts comes up in the conversation. While those businesses seeking funds can be as diverse and different as can be imagined, the contracts that they have with factoring companies are very similar. All factoring contracts share certain standard expectations and understandings, but within those areas of agreement you’ll find some variations. One of those variations revolves around term contracts, with a set length of time that the contract is in effect. Some factoring contracts feature short-term time frames, such as six months; some feature long-term expectations, such as one year; and some are drawn up with month-to-month terms.
Leading factoring companies are upfront and transparent about contract terms in their factoring agreements, which can be customized for individual clients based on their financial needs and situations. While the absence of any timeframe may offer the highest degree of flexibility for clients who are unsure of their company’s potential longevity, certain advantages come with term contracts. If a company owner knows that he or she will be partnering with a factoring company for the foreseeable future as part of the firm’s plans for business growth, then it makes sense to commit to that factoring company for a certain number of months. Many factoring companies match a client with a dedicated account manager and the longer that client partners with the factoring company, the better the account manager gets to know the business and its management. In many factoring companies, those long-term relationships earn valued clients significantly lower factoring rates and other benefits.
Benefits of Term Contracts
- Higher levels of commitment to clients
- Beneficial relationships with factoring professionals who are invested in a company’s growth
- Lower factoring rates and other benefits