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How much does factoring or discounting cost?
The rate depends on your industry, turnover and number of invoices you send. Typical rates range from 0.5% – 2.5% of your turnover for factoring, and from 0.2% – 0.5% for discounting. Bear in mind with discounting you are only receiving finance, and not ledger management or debt recovery. You will also have to pay an interest rate on the total amount lent, ranging from 0.5% to 2%. This makes factoring the most cost effective way for you to finance your company.
Do I have to sign a long contact?
It depends on your requirements, here you can find providers who offer spot and single invoice factoring which require no ongoing contracts. However to get the best rates and services some companies may require a contract for services so they can commit their time and resources to your company.
Can I get out my contact?
All companies will offer you a way to release yourself from the contract. It’s usually as simple as giving notice and paying your outstanding balance. If you find a better rate from another factoring company at any time, they will usually pay the outstanding balance on your behalf so you can switch with no hassle.
How long does it take to get the cash?
Once the terms have been accepted you can expect to receive funds within as little as an hour. Some companies delay payment for the first invoice by 24 hours to ensure no problems arise.
Do I need a credit check?
You or your company do not require any form of credit checking or asset security to benefit from invoice factoring. All that’s required is the client’s invoice as security. The factoring company essentially buys the invoice from you for a small percentage.
Benefits of invoice discounting