How to Switch Factoring Companies

Last Updated January 22, 2026

A factoring relationship can be exciting at first, as your company’s cash flow improves and you have a process in place to efficiently factor your receivables. Over time, however, you may find that your existing provider is no longer the right fit due to customer service issues, limits on factoring certain debtors, or other challenges. In these cases, it may be time to switch factoring companies.

This article covers when to consider switching factoring companies, the most common reasons businesses do so, and how to navigate exiting a factoring agreement.

Why Do Businesses Exit Factoring Agreements?

There is a number of reasons a business may want to switch to a different invoice factoring provider. However, we find that the reasons below are most common across industries.

• Length of Agreement: Shorter terms offer flexibility. Most factoring agreements last one year, but some extend two or three years. Avoid long contracts to maintain your options.
• Auto-Renewal and Notification Windows: Many contracts automatically renew without notice. Know your renewal date and the notification window so you can exit or renegotiate before being locked in.
• Early Termination Fees: Factoring companies typically charge fees to cover setup costs if you exit early. Understand how your fee structure works so you can calculate potential costs before making a move.

When Is the Right Time to Switch Factoring Companies?

It may be time to consider switching your factoring partner when your current arrangement no longer aligns with your business needs or cash flow goals. Common situations include:

• Your current contract is nearing renewal, giving you a natural point to evaluate other options.
• You notice consistent delays, service issues, or miscommunication with your factoring provider.
• Your business growth or changes in your customer base require a factoring partner with more industry-specific expertise.
• New providers offer competitive rates or more favorable terms that could improve your cash flow.

Switching factoring companies is not always straightforward. If you plan to exit before your contract ends, you’ll need to carefully review your agreement’s term length, auto-renewal clauses, notification windows, early termination fees, and any other conditions that affect timing.

How to Switch Factoring Companies

Switching factoring companies doesn’t have to be overwhelming, but it does require planning to protect your cash flow and avoid penalties. Here’s a detailed step-by-step guide to make the transition smooth:

1. Review Your Current Agreement Thoroughly

Before taking any action, carefully read your existing factoring contract. Pay attention to the length of the term, auto-renewal clauses, notification windows, and early termination fees. Understanding these details is critical to knowing when you can exit without penalties and what costs to expect if you terminate early.

2. Set Your Notification Date and Communicate Clearly

Most factoring agreements require written notice to terminate before the auto-renewal period. Mark the notification window on your calendar, and draft a clear, professional letter of release. Sending your notice on time is crucial; missing the window could lock you into another term.

3. Calculate Potential Exit Costs

Early termination fees vary by provider. They might be based on your monthly minimum fee multiplied by remaining months or a percentage of remaining invoice volume. Run the numbers carefully to understand the total cost of exiting, so you can budget and decide whether switching now is financially smart.

4. Evaluate and Choose Your New Factoring Partner

Take the time to research factoring companies that meet your business needs. Look for competitive rates, excellent customer service, and expertise in your industry. Check reviews, ask for references, and ensure their terms give you the flexibility you need.

5. Plan the Transition of Outstanding Invoices

Work with both your current and new factoring companies to coordinate the transfer of any invoices already in the system. Make sure there’s no overlap or gap in funding. Confirm who will collect payments for outstanding invoices and how remaining balances will be handled to avoid cash flow disruptions.

6. Confirm and Update Internal Processes

Inform your accounting team, finance department, and any relevant staff about the switch. Update internal records with your new provider’s information, including payment instructions and contact points. This ensures a seamless continuation of invoice factoring operations and prevents delays in funding.

In Summary: Switching Invoice Factoring Companies

To recap, when you sign an agreement with a factoring company:

1. Remember a shorter term is best, don’t sign multi-year agreements.
2. Know your notification date and set up a calendar reminder to review the agreement each year.
3. Understand how much it would cost to exit your agreement early in case you find yourself wanting to go with another partner

Need a New Provider? altLINE Can Help

If you are looking for a new factoring company to switch to, give altLINE a call at +1 205-607-0811 or fill out our quote form.

As a bank factoring company, we pride ourselves in providing top tier customer service and transparency throughout the entire factoring relationship.

Grey Idol

Grey was previously the Director of Marketing for altLINE by The Southern Bank. With 10 years’ experience in digital marketing, content creation and small business operations, he helped businesses find the information they needed to make informed decisions about invoice factoring and A/R financing.