There are considerable variations in the way factors, firms collateralizing commercial B2B (Business to Business) accounts receivable (AR), charge for their services. Understanding the invoice factoring rates you can expect to pay starts with obtaining, in writing, a complete list of the fees you can expect for your AR.
Unfortunately, many factoring firms provide invoice factoring rates that are not comprehensive and do not contain information about the hidden fees associated with the service. This is not typical of the top factoring firms as these companies are transparent, open, and forthcoming about all fees charged and when they apply.
To ensure you have a comprehensive picture about invoice factoring rates from any factoring firm carefully review all written information from the company on the following potential hidden fees you will have to pay.
1. Minimum volume – fees charged if a minimum volume of AR is not met
2. Minimum factoring – fees charged if a set amount of factoring is not achieved
3. Audit – fees associated with the audit of your account with the factor
4. Out of pocket – this can include everything from postage and copying to actual supplies used by the factor in the processing of invoices or funding. These may also be called administrative fees.
5. Due diligence – fees charge by the factor for determining the creditworthiness of clients
6. Closing – fees complete the factoring process
7. Legal – any possible legal fees faced by the factoring company may be directly passed on to you
8. Accounting – fees charged for the accounting services the factor provides
9. Online Access – this could also be called an online reporting fee where access to your information may come with a cost
10. Rush funding – accessing funding on a priority basis or a shorter time may result in addition fees
11. Termination – fees charged for terminating your contract with the factor
12. Wire and ACH – fees assessed by the factor to deliver your funds to your bank
13. Unused line – similar to a line of credit non-usage fee this is the amount assessed if the factoring minimum level is no met
Not all factoring firms charge these hidden fees. In this case and with these companies invoice factoring rates you are quoted is what you can expect to pay.
Be sure to obtain all information on invoice factoring rates in writing from the factor. It is also well worth the time to compare different invoice factoring rates between factors to see your cost of doing business with each firm.
At United Capital, we provide invoice factoring rates free from any hidden fees. To see more about our services visit us online at website URL.