Several factors determine the cost of factoring accounts receivables. The factoring costs is not based solely on the credit worthiness of your customers. While it is true that the risk in the typical factoring transaction is highly dependant on the credit standing of your customers, it is only one of the components used in pricing a factoring relationship. Other factors considered are the selling terms, the integrity of the business owners, and the overall business plan.
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Our factoring rates range from a discount fee of less than 1% per month for relationships over $5 million per month, to a discount fee of 3.5% per month for factoring clients at the level of $10 thousand per month.
Just a few of our deal structures offered…
- Daily rates for clients with quick accounts receivable turn around.
- One time flat factoring fees for clients with longer payment terms.
- Per invoice factoring fee, plus interest for days outstanding.
- Flat factoring fee with rebate paid back at month end for invoices that paid earlier than expected.
SAMPLE FACTORING DEAL STRUCTURE
Our factoring programs offer advance rates between 80% to 95%. In the Medical and Construction factoring field the advance rate will typically be 70% to 75%.
When the invoice is submitted, your funds will be electronically transferred to your checking account within 24 hours. The factor will then wait for payment from your customer. Once the customer submits their invoice payment, you will receive the remaining balance less the factoring charges.
A $10,000 invoice is submitted for factoring and your advance rate is 90% with a flat factoring fee of 3%, you will get $9,000 from the factoring company immediately and $700 after payment arrives. The factor earns $300 in this example.
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Can I afford the cost of factoring?
This question is asked by most business owners with growth potential that are considering factoring. Most successful entrepreneurs will look at the potential future additional sales opportunities that factoring can bring to the table.
- If all my customers paid in one day how would my business change?
- Could I receive supplier discounts by paying my vendors faster?
- Could I add additional sales by offering flexible payment terms?
The bottom line is that every business is different, but in most cases factoring will improve cash flow, this typically helps all companies perform better.