 The advanced funding you receive for your receivables and the discount fees you will pay are based only on the financial strength and credit worthiness of your customers, not your business! This is the important point to understand about factoring.
Rates will also vary depending on the total dollar amount you intend to factor on a monthly basis.
There are some examples of how the fees and funding can work.
Sample Fee Structure and Funding
Advanced Funding
You will receive between 80% and 90% funding of the invoice amount by sending in an invoice to be factored. It will be possible to receive within 24 hours after the invoice has been verified. But this depends on the invoice amount and the business paying the invoice. As this is your advanced funding, it's your money, so you may spend whenever you want. Advanced funding is wired to your business bank account.
Discount Rate = Factoring Fee
Only based on a Per Diem Rate, factoring fees are best. The average Per Diem factoring fee is between 0.095% and 0.085% (per day), that's less than 1 tenth of 1 percent, per day the invoice ages with the factor.
Sample Factoring Fees
| Length of Time for Payment | Sample Discount Rate | | Per Diem Rate (per day) | 0.095% | | Customer pays in 15 days | 1.4% | | Customer pays in 30 days | 2.8% | | Customer pays in 45 days | 4.2% | | Customer pays in 60 days | 5.7% | | Customer pays in 75 days | 7.5% | | Customer pays in 90 days | 8.5% |
Some factoring companies charge fees based on a Per 30 Days Rate (such as 3% per 30 Days). It offers little flexibility when customers pay invoices a few days early or a few days late from set 30 day increments. And this is the own side to Per 30 Days schedule. For Example, if a customer pays the invoice 31 days later you will be charged for 60 days worth of fees. And in case if your customer pays the invoice 15 days later, then you will be charged for 30 days worth of fees.
Per Diem Fees allows you to pay for each individual day the factor owns the invoice, no more, no less.
Remainder of the Advance minus the Factoring Fee
When your customer pays the invoice you will receive the remainder of the advanced funding, minus the Factoring fee (discount rate).
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