What Are The Factoring Costs for my business or company?

Depending of the service purchased Factoring Companies may charge a commission for performing the credit and collection function, for purchasing the client’s receivables ( with or without recourse) and charge interest on funds provided.

Factoring Companies commission for their service usually ranges between 0.3% and 3% of sales. The amount paid also varies depending on the type of agreement; whole turnover agreement or selective invoices and debtors. A number of other conditions will also determine the Factoring costs for service such as:

  • The nature of the business, including styling considerations, seasonable aspects, stability of products, whether the customer is a manufacturer or wholesaler
  • Annual sales volume of client. As volume increases, the percentage charged will usually decline
  • Average size of order processed. Large orders are no more time consuming to process than small orders and produce more revenue for the Factoring Companies. Therefore, the Factoring Companies commission rate may decline as the size of the individual orders rises
  • Average annual sales volume per customer. As this figure rises, there is less work and follow-up for the Factoring Companies, since the client’s business is becoming concentrated in few accounts. The commission rate will tend to decline
  • Credit worthiness of the client’s customers. If the risk is relatively small, the Factoring Companies commission may be lower
  • Client’s selling terms. If they are long, Factoring Companies must wait to collect its receivables, this would require a higher fee
  • Other services such as billing, may be provided by Factoring Companies that will increase costs and raise the charge to the client

Additionally, the Factoring Companies charge interest on funds provided. This borrowing is typical this is charged a rate above the Bank of England base rate. To find out more and obtain indicative fees call us or apply online