Our Typical Factoring Rates
Factoring is a service characterized by an extremely high degree of customization. Mainly there are two things that will affect your factoring rate, the risk of buying your specific invoices and your factoring volume. If your factoring volume will be high and the risk low then you will get lower factoring rates and fees, otherwise if your factoring volume will be low and the risk high then you will probably get higher factoring rates by us.
We determine your risk and your volume by analyzing these five things:
- Your monthly factored volume
- The size of each invoice
- Your operating sector
- The credit quality of your clients
- The stability and the overall performance of your business
Here is the list of the typical factoring rates that we apply to our clients:
|Payment in advance
||70% – 90 %
||3.0% – 3.5%
||4.% – 4.5%
||5.% – 5.5%
|Every 10 days over the 90 days
|Every 10 days of late payment
||0.5% – 0.75%
Other Services and fees
|Review of the factoring application
||Free of charge
|Factoring contracts drawing up fees:
||Free of charge
|Increasing of limit, change of the advance rate
||Free of charge
|Invoice submission fee
|Invoice processing fee
How does it works exactly? The majority of invoice factoring transactions, finance your invoices in two installments, the advance and the rebate. This example will better explain how it works:
A client has a 1,000 $ invoice to be discounted. This invoice shall be paid in 30 days normally. The client gets the following conditions from the factoring company: a 3% rate of discount plus 0.25% administration fee and a 90% rate of payment in advance.
- The factoring company deposits 900 $ (1.000*90%) in the client’s account in advance.
- After 30 days the invoice is paid by the debtor for the amount 1.000 $ onto the factor’s account.
The factor proceeds with the calculation of its fee 32.5 $ (1.000*3.25%).
- The factor rebates 67.5 $ (the remaining 100 $ less the 32.5 $ fee) and deposits the money in the client’s account.
Let’s take a look to another example, this time a reverse factoring one,
Reverse factoring is when a Factor interpose itself between a company (often a big one) and its suppliers and commits to pay some of the suppliers’ invoices at an accelerated rate (respect to a normal 90 days delay) in exchange of a discount on the overall value of the invoice.
Often, a large company (the buyer) has a lot of suppliers (sellers) that issue invoices continuously. Reverse factoring is usually begun by large companies that want to improve the cash flow situation for their suppliers and also to optimize its own cash flow. At the same time many suppliers of a large company, for many reasons, are interested to be paid in advance respect to a possible 90 days terms of payment that the buyer applies to its suppliers.
- The factoring company assumes the responsibility to pay the value of the invoice (let’s assume an invoice of 1,000,000 ALL) for the services or goods offered by the supplier to the large company, signing two kinds of contracts, one with the buyer and another one with the seller.
- The supplier receives in advance 947,500 ALL by the factor, less the 5% interest rate and the 0.25% fee (100% – 5.25% = 94.75%*1,000,000 ALL).
- After 90 days the buyer transfers to the factor the entire value of the invoice (1,000,000 ALL) issued by the supplier. The difference of 52.500 ALL constitutes the profit of the factoring company for the financial operation offered.