Why should you consider a bank owned factoring company? What are the benefits and drawbacks? Do you have to switch your bank to work with one?
Choosing the right invoice factoring partner is critical to ensuring your business’s financial health and stability. While there are many factoring providers available, working with a bank owned factoring company offers unique advantages that stand out from other options. Here’s why:
Benefits of a Bank Owned Factoring Company
The primary benefits of working with a bank owned factor lie in the potential cost savings, and the peace of mind that comes from the accountability and regulatory boundaries imposed on banks.
Lower Cost of Funds
Bank owned factors often have access to lower-cost capital compared to independent providers. This can translate into more competitive fees and better terms for your business, helping you maximize your cash flow without excessive costs.
Safety and Stability
The factoring industry is not highly regulated. Banks, on the other hand, are subject to strict regulations and oversight, which ensures higher levels of security and reliability. Some bank owned factoring companies are subject to 3 to 4 audits per year by internal, external, and government auditors. When you partner with a bank
owned factoring company, you benefit from the institution’s established reputation and soundness, giving you peace of mind that your funds and business relationship are in trusted hands.
Streamlined Operations
Every factoring company needs to work with a bank in order to provide their services. This comes with extra costs and extra steps. When the bank is the factoring company, there are more opportunities for speed and cost savings.
Additional Services
When working with a bank owned factor, you may be able to take advantage of other financial products that other factoring companies may not be able to offer.
Drawbacks of a Bank Owned Factoring Company
Stricter Approval Requirements
This depends on the risk tolerance of the bank. Some banks may be more risk tolerant, while others may have stricter approval requirements compared to factors that are not bank owned.
Slower Onboarding Process
Since banks are so highly regulated, the approval process may be slower with a bank owned factor, since they must ensure that they have a paper trail for everything.
Maintain Existing Banking Relationships
It’s important to note that just because you work with a bank owned factor doesn’t mean you have to change your banking relationship. There may be benefits to banking with your factoring company, and some bank owned factors may require it, but not Flexent. We hope to complement your financial strategy without unnecessary disruption. It isn’t about replacing your banking services—it’s about supplementing them with a tool that fills a gap that traditional loans or lines of credit may not address.
Conclusion
Using a bank owned factoring company combines the flexibility and convenience of factoring with the stability and trustworthiness of a banking institution. A bank owned factoring company may have stricter approval requirements, or a slower onboarding process, but it can still be an ideal choice for businesses seeking competitive costs and reliable service.
