This is however unusual and we only add this to highlight the importance of taking proper advice and considering total costs. We have also seen clients where their monthly ‘additional charges’ or ‘disbursements’ are more than the service fee and discounting fee combined. The numbers above are based on easy numbers but they are based on the pricing structure of two very well known invoice factoring companies so it is a very relevant and valid example. Let’s have a look at the impact of ‘additional fees’ on the two invoice factoring quotations when we look at total annual costs.Īs you can see in this well engineered example the headline rates can be misleading yet many businesses base their decision on the headline rates of invoice factoring costs. You will see that the discounting fee of ‘Factoring company A’ has a minimum base rate of 3.00% so with the margin the total discounting fee is 5.00%. Some lenders have an all inclusive service fee while others will charge in addition to the service fee for various services. This list of additional fees is by no means exhaustive as the list can be a long one. Let’s look at their charging structure in more detail: The information you need may only be available upon request or when you have already made a decision. Unfortunately there is not really enough information to establish the true costs of invoice factoring. Obviously ‘Factoring Company A ‘ looks like the most cost effective solution. Let’s look at the headline rates from 2 different factoring companies for a business with a gross turnover of £1m and average borrowings of £100,000: Many businesses make the mistake of simply comparing these two fees to establish the most competitive offer and this can be a very big mistake. Most factoring companies will quote the same headline rates which are the service fee and the discounting fee.
How do I compare the costs of different factoring companies?
#INVOICE FACTORING COSTS FULL#
This is why we feel it is imperative that you have a full understand of the costs involved and how those fees are applied.
Invoice factoring costs can be significant and the difference between the cheapest available facility and the most expensive can be surprising.
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