How Much Does Invoice Factoring Cost?

What is the Cost of Factoring Receivables?

Invoice Factoring Cost Summary

How much does factoring receivables cost? Factoring companies usually charge discount rates of 1% to 5% for a stated term, base on your business’s risk, the cash advance amount, and monthly receivables volume. Additionally, risk is usually measured by the credit quality of your customers or account debtors. Therefore, stable businesses can qualify for the best invoice factoring cost and rates, even with a prime rate north of 8% and decade high interest rates.

Factoring companies use many methods to compute their invoice factoring rate and also have many additional invoice factoring fees. We hope you have a better understanding of your true cost of invoice factoring after reading this article. Receivable factoring costs at Bankers Factoring run from .9-1.6% per 30 days for our average factoring rates, including bad debt protection. We think the best factoring companies are always non-recourse and gives you the safest and affordable additional cash flow.

However, hidden fees can creep up base on your factoring company. The average factoring agreement includes an initial cash advance, discount rate, and cost structure. But Bankers Factoring offers non-recourse factoring with no hidden fees and rates starting at .9-1.6% per 30 days. We also offer a sliding factoring cost scale as your business grows which is unique among any invoice factoring company.

You can also read our article on what is receivable factoring.

How much does invoice factoring cost?

The factoring rate, also called the discount rate, ranges from 1% to 5%, base on the factoring company and the factoring agreement. Conditions contributing to your factoring cost include your monthly sales volume, total accounts receivable (A/R) amount, and your customer (account debtor) credit profile. It is important to understand the two invoice factoring agreements; “recourse” and “non-recourse.”

Full or Recourse factoring is when the responsibility of unpaid invoices goes to your business as the creditor. Without or non-recourse factoring refers to the factor responsibility for uncollected receivables due to account debtors’ slow pay, insolvency, and bankruptcy. Your customer’s credit rating is excellent, but we use their good credit to greatly increase your cash flow.

You can also read our article on what does invoice factoring cost.

Contact Bankers Factoring today to learn about a non-recourse factoring agreement that includes bad debt protection, rates starting at .9%, and up to 93% cash advances against your invoice value.

Average Invoice Factoring Rates

Typical invoice factoring costs start around 1% and go up to 5%, a chance of risk link with your receivables, debtors, and operating industry. Complete factoring rates include your discount or rebate rate and other fees. Bankers Factoring adds value by including bad debt protection with no hidden fees. With us, you only pay the factoring rate and not an another percentage fee.

Keep reading the full article, Factoring Rates and Fees Explained.

Determining Factor Financing Rates

Factoring companies charge rates based on a percentage or discount to finance your business. A/R factoring rates are usually charged on your gross monthly sales over a set period. For example, a factoring company may charge 2% for 30-days and then 1.25% per 10-days following. Discount rates or factor rates are simple to understand.

You can also read how much do factoring companies charge.

Four main criteria determine invoice factor rates for invoice funding services from invoice factoring companies:

Customer Risk

Risk is determined by your company’s type of business (industry), the creditworthiness of your customers, and the value of your receivables. A credit check of your customers is the biggest variable.

Invoice Factoring Volume

Volume refers to the number of invoices you factor monthly and the total dollar value per month. As your monthly receivables increase, your factoring rates become more cost efficient. The invoice amount will affect your rate, too.

Invoices Time to Pay

The time required to finance your invoices relates to the credit terms extended to your account debtors. For example, NET 30 terms will pay within 30-days. Net 90 will pay within 90 days.

Invoice Factoring Advance Rate

The advance is how much funding your business receives after the initial account setup. This ranges from 80 to 93%, depending on your industry and business. This advance amount can be via ACH or wire transfers.

Factor finance costs are typically prorated, given how long your customers take to pay. Rate costs are lower for companies with lower overall risk and more accessible receivables to manage.

Rate costs are usually prorated based on how long your invoices take to pay unless you have a flat fee schedule. Businesses with complex receivable processes and riskier industries tend to have higher rates.

Keep reading the full article, Understanding Factoring Rates and Fees.

Types of Factoring Cost Structure for Factoring Services

You will see the following common factoring rate structures:

• Flat fee factoring fee or rate: a one time flat rate cost to you when your customer pays invoices within terms. For example, 94% advance with a 6% flat fee. You see this in small trucking factoring.
• Split fee factoring rate: a hybrid cost model with different rates in accrual periods. For example, a 3% factor rate for the first 30-days and 1% per additional 10-days following. Factoring companies can offer you daily, weekly, and monthly schedules. 
• Daily fee factoring rate: discount rates charged daily is used in times with quick debtor payment cycles. Bankers Factoring usually use a daily rate after the initial 25-day or 30-day rate. For example, 1.4% for the first 25 days with a .065% daily rate thereafter.
• Prime plus factoring rate: prime plus factoring fees accrue each day an invoice is unpaid. The daily rate is the current prime lending rate plus an annual rate based on your cash advance. This is more like a traditional line of credit for large volumes of receivables.

Invoice Factor Rate versus Invoice Factor Fee

Finding the best factoring rate is critical to protect your margins. Understanding if your factoring company charges other fees on top of your discount rate is crucial—the total cost of the factoring agreement matters for your invoice financing services. The total price of factor finance includes the discount fee or factoring rate, and your factoring advance percentage.

Factor fees refer to administrative charges, processing fees, account setup costs, and other hidden fees from your factoring company. It is vital to find trusted factoring and get your best prices. Bankers Factoring protects our clients with bad debt protection, no hidden fees, and rates starting at .9-1.6% per 30 days.

Understanding the Best Factor Company Rates

The best factor rates start at .9-1.5%, with Bankers Factoring advancing you 80-93%. Rates and advances vary by business, industry, A/R volume, and general credit risk. Non-recourse factor financing provides bad debt protection and the lowest factoring company rates.

To receive the best cost for factoring and unlimited working capital, your customer credit quality and the stability of your business help secure the cheapest lines of finance.

Understand how factoring works, then call us at Bankers Factoring to see how you can increase sales and profits even with the cost of invoice factoring for your business and our aggressive fee structure. We have the best invoice factoring rates versus what factoring companies typically charge. We want to be your choice of the few award-winning factoring companies with simple cost of factoring.

Ready for the owner-employees of Bankers Factoring to help you grow your business with the best rates for invoice funding, including bad debt protection? Use our fast online factoring application or call the toll-free number 866-598-4295

• Facebook
• Twitter
• LinkedIn