How Many Factoring Quotes Do You Need?
How many factoring quotes is enough? It is a difficult question and one that many prospective users of factoring struggle with.
We often ask them how many they are looking for, but the answer normally varies. This article looks specifically at some helpful advice about how many to seek and gives you access to our search service to help you find however many you are looking for.
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When To Stop Looking For More Quotes?
Everyone wants to make sure that they are getting a good price that is competitive, but to someone who is not familiar with the marketplace place it is hard to know whether the quotations you have are representative or not.
This requirement is exasperated by the vast differences between prices provided to the same client company. Our own research identified a 167% swing between the cheapest factoring price quoted by a provider and the most expensive provider. With this range of pricing on the market, randomly picking a provider could land you with a hefty additional bill that you could have avoided.
Getting a single quote is clearly open to the possibility that you have picked the most expensive factor so that would suggest that more than one quote is preferable so that you can at least see if they are all in the same ballpark. One might argue that if there were a wide spread between the handful of quotations that you have received, good practice would be to seek further quotations to ensure that you have sufficient representation from those that are at the keen end of the pricing scale rather than a single price that stands out from the rest. Factoring brokers can always advise you about which factoring companies are the cheapest at any given time, for your particular set of circumstances.
Factoring Price Comparison Sites
The rise of comparison-type services in the financial services sector has also led towards a culture of comparing numerous quotes. At the same time, there remains an element of distrust even in using these comparison websites. Customers sometimes go to comparison sites but will then use several of them in order to ensure, in their minds, that they are shopping around sufficiently. This is because they are concerned as to how unbiased each site might be.
The market could be said to be less complex than many financial services markets, having circa 90 companies offering such services in the UK, however, there is still a need to ensure that you are receiving a representative sample of prices.
Several of the reputable brokers within the market provide a comprehensive service that includes support and advice throughout the process which is far beyond the service that you are likely to receive from a comparison site that compares only prices.
Research About Making Choices And Choice Overload
There is plenty of research published on the internet that suggests that when faced with any more than 6 choices, the large number of choices dramatically reduces the ability of most people to make a decision - resulting in choice overload. In our experience, we tend to find that most prospects seek 3 different quotations but that may increase if there is a dramatic swing in pricing between those that are received.
It is also important to consider who is providing the quotations. If they are direct from factoring companies then 3 different prices would seem like a reasonable number. However, a mistake that many prospects make is that they will speak to more than one broker which results in repeating the process numerous times. Any truly independent brokerage should have access to all the providers within the market and so should be able to source as many quotations as you wish from a cross-section of factors. If you can establish that the brokerage has no ties to any one provider, you can use them as a conduit to access the number of quotes that you are seeking. Most brokers offer a price search service without charging you, they will tend to make a commission from the finance company in respect of any facility that you choose to take up - beware of upfront fees.
Some brokerages will tell you that they only get one quotation, their best price for their client. The only concern with such an approach is that you need to ensure that the broker is not biased towards that one provider for their reasons e.g. commission levels etc. rather than because they can provide you with what you need. There is no single provider within the factoring market that will suit all customers.
Summary - How Many Factoring Quotes?
So in summary, whilst there are no rules it would seem that 3 factoring quotes would be a reasonable number, either sourced directly from the factors themselves or via an independent factoring broker with access to the whole factoring market. As factoring brokers ourselves, we always discuss the client's requirements and are driven by the number of prices that they request.
