#Invoice factoring explained plus#

Working capital is moved forward by 30 to 90 days to get you through any short-term cash crunch via our factoring services. The length of time the customer takes to pay is 45 days until the invoice is paid.

The following example of non-recourse accounts receivable financing includes the discount fee and the entire fee structure. Also, an implied cost is how long the factoring company holds your reserve. The higher the factor advance rate, the lower your overall cost. Your total cost to factor your invoices is your factor rate times the invoice amount. If you are a start-up, make sure your receivable factoring can go down with tiered pricing. Recourse factoring is considered riskier for your business compared to nonrecourse factoring. In this instance, Bankers Factoring has the right to take recourse against the business and its assets. Recourse service is when you take on the credit risk when selling invoices. We always make a credit determination on your customer, who is paying the invoices. Accordingly, at no extra charge, your business is protected from unpaid receivables that your company sells.įor example, if you sell Bankers Factoring $100,000 in invoices and your customer declares bankruptcy, we take on the credit risk and the bad debt. What is better for costs, Recourse or Non-Recourse factoring?įor example, Non-Recourse factoring provides additional value to your business through bad debt protection.

With our competitive discount rates, we can provide additional cash flow. The split rate method is the most common at Bankers Factoring with our Non-recourse factoring services.

Split Rates: receive a fixed rate for 30 days, then accrue at a different per 10-days following.

Variable Rates: charges accrue in the period based on prime or going rates.

Fixed rates: one flat rate charge for the funding services.

Also, there are different types of rate structures: Your fees and rates for selling invoices depend on the type of funding agreement or arrangement, recourse or non-recourse.

#Invoice factoring explained plus#

Be careful about prime rate based pricing as you can pay prime + 3% for the money, which now equals 11%, PLUS a factoring fee of 1-2%, What do factoring companies charge? Invoice factoring costs at Bankers is as simple as 1.6% of the invoice amount if paid in less than 30 days versus the complicated invoice factoring rate tables used by other invoice factoring companies. Hidden fees can easily eat up your business’s cash flow it is critical to read the service agreement and understand the potential charges and your average factoring rates. In addition, funding rates charged to your company cover risks associated with your cash advances. We buy your unpaid invoices, and charge a small factoring fee, also called the discount rate or rebate. With Bankers Factoring, we have no hidden fees in our invoice financing services. With high-interest rates and fixed rates after 30 days, companies can lose cash flow versus variable factoring rates. Selling your invoices is a cost-efficient way to inject working capital into your business. How much does it cost to factor invoices? We want you and your CPA to understand the journal entries in factoring and the accounting math behind your cost of factoring receivables at Bankers, and what non-recourse factoring means for the success of your business. Here are non-recourse factoring rates and fees explained from an award-winning invoice factoring company.īusiness Accounts Receivable Factoring is not algebra and, at its most complex, requires a small bit of multiplication. At Bankers Factoring (Bankers), our goal is that you can calculate your A/R factoring rates and fees, including credit protection, in your head. Many Factoring companies make it difficult to calculate your true cost of invoice factoring. Invoice Factoring Rates & Fees Explained What is Invoice Factoring’s Cost to You?