Understanding Factoring Rates

The first thing you need to understand when considering a factoring company for your business cash flow needs is factoring rates. While your partners at GO Funding, LLC will help you understand and connect with the right solution to meet your needs, here are a few things you should know to get you started. 

Each factoring organization will provide different service levels, and understanding the cost of factoring is essential. 

What Elements Do Factoring Companies Consider When Setting Rates?

The total amount of invoices you can sell will often affect your factoring fees. The fee you pay will decrease as your monthly volume increases.

A factoring business buys your invoice and assumes the risk that your customer will pay. The credit of your consumer will therefore impact your rate. The factor will charge more if you select non-recourse factoring because of the increased credit risk.

Your charge will depend on the terms of payment that you and your client have agreed upon, as well as the factor’s prior dealings with the account debtor.

What Factoring Rates Involve?

Factors have a wide variety of fee structures. You must understand the factors that go into the factoring service cost you have committed to paying (and what you get for those fees). What works for one company may not be the greatest option for yours.

The costs charged by a factor can differ depending on the sort of program you select. No, of how long it takes for payment, the factor will charge you a flat rate, which is a proportion of the invoice’s value. The amount you pay varies solely on how long it takes your consumer to pay. Factors also provide tiered pricing. Or, you can like to choose a “Prime plus” program, in which you are charged both a fixed interest rate and a percentage of the invoice (usually tied to the Prime Rate charged by banks). A “Prime plus” structure doesn’t feature “jumps” from one tier to the next; instead, the charge is determined by how quickly the invoice is paid.

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With 20 years of experience, GO Funding has successfully helped companies re-evaluate their financing relationship and find best-in-class invoice factoring, receivable financing, payroll funding, and asset-based lending solutions.

Our passion is helping businesses obtain flexible alternative financing solutions tailored to meet unique needs and goals from startups to established organizations. Our services are 100% free.