It's also necessary for you to understand what the invoicing process will be like after you have chosen your factoring company. A question that I hear frequently is "How soon can I be funded?" The answer to this question can vary from days to weeks or perhaps months. In order to set up a company for its initial funding, a factor requires you to fill out and return legal paperwork, including an application, contract, and a tax information form. In addition, you may be required to send in a current accounts aging report, federal tax returns, copy of your trade name certificate or fictitious name filing, articles of incorporation and bylaws, customer lists, copies of invoices, copies of driver's license, a copy of a voided check, etc. Because there are legal documents involved and liens have to be filed on your medical transcription receivables, the factor can usually move as quickly as the completed paperwork is received. In most cases, 5-7 business days is the average amount of time it will take to receive your initial funding. From there on, the funding process will most likely speed up to 2-3 business days after you present invoices to the factor. There are some factors that can deliver same-day funds via a wire transaction, but just be aware of the fact that there will be fees associated with the amount of time it takes for you to receive funds into your account. For example, a same-day wire transaction will often cost you more than an overnight ACH transaction.

Another topic involved with the entire funding process is what's known as the "reserve account." Reserve is the percentage of an invoice amount that the factor will hold onto until it receives payment from your customers. This reserve amount will eventually be released back to you once your invoices have been paid and the factor has collected its fees. For example, let's say that you have an 80 percent advance rate and 20 percent is held for reserve. Let's also say that your invoices were paid within 30 days, translating into a three percent discount fee. The initial 20 percent minus the three percent discount fee equals 17 percent, which is due back to you. Some factors will have automatic reserve releases weekly, some every other week or some monthly. Then there are some factors who will not release the reserve unless it is specifically requested by their client. You also want to consider whether or not you want a factor to handle all of your back office services including billing, collections, issuing payroll, etc. Some factors will do a portion of the back office services and some will only act as a funder. Just remember that if you choose a factor that is willing to do all of your back office services in addition to funding, there will most likely be extra fees associated with the extra work. You may prefer to hand the entire billing and collecting process over to a factor so that you can focus your efforts on other areas of growing your business. Or you might want to work with a factor that will process and mail your invoices in addition to collecting while you continue to run the company's payroll in-house. Perhaps, you would feel the most in control if you continue to invoice and collect and do your own payroll in-house. Whichever you choose, there will be a factor out there that is with the best fit for you.

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