Invoice Factoring Costs
Most businesses often decry high hidden charges soon after signing contracts with invoice factoring companies. However, each business has the power to determine who they should sign a contract with; mostly after they are assured of a transparent relationship when it comes to invoice factoring costs. Note also that a deal can only be great if you are well aware of the services you expect from these companies. Continue reading to learn a bit of how factoring businesses charge their clients and what you should do to get the best deals.
For starters, you will need to produce your annual sales volume. Remember that your invoice is the sole asset the lenders have and thus they have to ensure that you have a spotless track record of handling money and invoices. They also want to ensure that you are not tied into debts and arrears, and that you have been consistent in making profits as a business. Another thing the lenders will want to confirm is the credit worthiness of your clients. In fact, your business may get invoices factored at a cheaper or expensive rate based solely on how trustworthy your clients are. So, when thinking about calling to an invoice factoring company, first take care of all the debts people owe you.
In addition, your financier will want to look at the invoice size at hand. Are you a startup or have you been in business for long? How much dare your income receivables per month? Usually, startups don’t find very cheap deals when compared to experienced business. Of course the reason lies in the credibility and track records. Businesses with small invoices may also not get very friendly rates as compared to the big firms. On the other hand, the invoice factoring costs may also vary depending on how long the invoices take to mature. If your invoice takes longer to get due, you might lower rates if you have a clean track record. Similarly, businesses that expect their invoices to due in maybe 15-30 days also get friendlier rates.
Invoice factoring costs also depend very much on the factoring company you work with. Bigger and more established factors tend to use a prime plus way of deciding on rates to charge. It often result to lower rates than the discount offering criterion smaller factoring companies use to attract more customers. Finally, be careful with accepting an agreement simply because the factoring fee is low.