Factoring companies offer businesses instant funding for their pending invoices. Still, understanding the cost of factoring is crucial to ensure that you’re getting a fair price so it will be sustainable for your business in the long run.
In this post, we’ll discuss factoring pricing, how much a factor charges, and aspects you have to consider before you partner with a local factor. Keep reading to learn how much this service costs so you can make an informed decision.
How much do factoring companies charge?
Your factoring fee depends on the pricing model of your preferred factoring company in Boca Raton. Here are the most common pricing models that local factors offer:
1. Tiered pricing
With tiered pricing, invoice factoring fees decrease as invoice volume increases. In short, the bigger the invoices you factor in, the lower the fees will be.
For example, invoices with amounts no higher than $100,000 will have a 3% factoring price. However, once it reaches $100,001 to $400,000 and up, the pricing tier will be lower at 2.5%.
With this pricing model, businesses will be encouraged to factor in more invoices to enjoy lower rates. It’s also a win-win situation on the part of the factoring company who will fund and collect the invoices.
2. Fixed rate
Other factoring companies in Boca Raton offer a fixed or flat rate fee, where you’ll pay a pre-determined fee for the invoices you’ll factor in. This is regardless of the amount or volume of the invoices you wish to fund.
For example, a factor may set a 3% fee for all invoices, whether it’s high-value or not. This can be advantageous for businesses who want full control over their factoring cost. Also, it’s specifically beneficial if customers take too long to pay and will be expensive to factor under tiered or variable pricing.
However, if you’re factoring in low-value invoices, a fixed rate may not be the most cost-efficient option. In that case, you’re better off choosing between tiered or variable pricing, whichever best suits your business.
3. Variable pricing
A reliable Florida factoring company like Factoring Express charges a variable or percentage pricing. This percentage is on a sliding scale, depending on your invoice value, the time it takes for your customers to pay, their creditworthiness, and other stipulations of the contract.
Under these terms, factoring company rates will be higher if you have a high-risk customer. The fees will also fluctuate based on the invoice age and payment terms that we will have with your customer. Also, the faster your customer pays, the lower your fees will be.
For example, here at Factoring Express, we can give you a variable rate of as low as 1.99% for the invoices you want to fund.
Overall, variable pricing is a very good option if you’re factoring low-risk invoices. It also allows you to customize the funding to reflect your business’s current financial situation.
Different factoring fees you have to know
There are many things that go into your invoice factoring costs. Here are some of the fees factoring companies charge and what they mean for your business:
1. As utilized fees
These are fees a Boca Raton factor will charge for verifying your invoice, running credit checks, and disbursing the advanced amount to your account. This includes, but not limited to, transfer fees and invoice processing fees. But here at Factoring Express, you’ll get free credit checks for any invoice you want to sell to us!
2. Documentation fee
This is usually a one-time fee that you have to pay once you sign the factoring agreement. It’s used to cover the process of due diligence and legal documents necessary for the factoring service. Other factoring companies may refer to it as “Setup Fee” in their contracts.
3. Non-recourse guarantee fee
With non-recourse factoring, you won’t be liable to pay back the factored amount if customers fail to pay the invoice. However, it will also incur an additional non-recourse credit guarantee fee, which serves as a financial protection for the factor.
4. Buyout fee
If you wish to transfer your invoices from an old factor to a new one, you may have to pay a buyout. This will cover the process of moving your invoices, which is usually a small percentage of the buyout cost.
5. Same-day funding fee
Some Florida factoring companies also charge a fee for funding your invoices within the same day. It’s a form of ‘convenience fee’ if you urgently need to cash out your pending invoices.
6. Renewal fee
There are factoring companies that will charge a renewal fee annually for your existing factoring account. This is often a fixed rate that you have to pay to keep access to your account and its features.
7. Early termination fee
If you’re planning to end the factoring contract before its intended duration, you will be charged an early termination fee. This is often a stipulation of many factoring companies, which they may leverage to lock you into long-term contracts.
However, if you’re not yet ready to commit to this level, you can always sign up with Factoring Express instead. We don’t charge termination fees or impose long-term contracts—you’re free to cancel anytime!
Factors determining invoice factoring rates
How much does a factoring company charge? Here are additional aspects that will impact your total factoring fees in Boca Raton:
1. Funding time
The time it takes to turn your invoices into cash will also affect the factoring fees you have to pay. Usually, same-day or next-day funding may have a higher fee due to the expedited process and the convenience you’ll enjoy.
However, if you’re just starting out in opening an account, the process may take a few days. Still, some factors like Factoring Express offer fast account approvals without the hefty cost, allowing you to sell outstanding invoices in as fast as 24 to 48 hours.
2. Invoice volume
In general, businesses that factor multiple invoices with high value can negotiate lower fees. Take note that this is a combination of the number of invoices you factor and their total face value.
Most of the time, factoring companies are willing to provide custom pricing for huge factoring clients.
3. Recourse vs. non-recourse terms
Your level of liability will also determine your factoring fees. Lower risk is often associated with lower rates for your business.
As mentioned earlier, non-recourse factoring tends to cost more than its recourse counterpart. So, if you want to save money on your factoring fees, you can opt for recourse terms, but with a slightly higher level of risk.
When you’re scouting for a ‘factoring company near me’, make sure that you inquire about their recourse terms. This will give you an idea about the fees you’ll have to pay once you sign up.
The good thing is that at Factoring Express, we conduct a thorough credit check on your customers before funding the invoice. This way, you can make an informed decision based on your customer’s payment history and ability to pay their pending invoices.
4. Type of industry
The industry where your business belongs is also a big determining aspect in your factoring rates. Some industries are known for late payments or difficult clients, which will require more resources to collect invoices.
Some of the industries considered to be ‘high-risk’ are healthcare, contracting, and construction. Meanwhile, low-risk industries include staffing, tracking, and consulting. All of them will have varying rates and fees, with freight factoring having the lowest factoring costs.
If you want to learn more about your industry’s factoring cost, contact Factoring Express for a free consultation. Our specialist will discuss our rates and fees to help you decide if we’re the right fit for your business.
5. Business track record
While factoring companies don’t require a good credit score, they will still assess your business’s track record when deciding about their service fees.
For example, they have to check how long you’ve been in business, how stable your sales are, and if you have been a factoring client before. Most of the time, they may charge a slightly higher fee for small businesses due to the added risk.
But the good thing here is that you can negotiate this fee later on as you build your credibility with the factoring company. Also, the more quality invoices you factor in, the lower your fees will be over time.
Partner with Factoring Express for the lowest factoring rates
If you’re looking for a reliable factoring company in Boca Raton with the best rates, you can always reach out to Factoring Express! We provide comprehensive factoring services with rates as low as 1.99%!
We can advance up to 97% of your invoice value within 24 hours, so you’ll receive your working capital when you need it the most. Not only that, we don’t have long-term contracts, monthly minimums, or termination penalties. You can cancel anytime without paying unnecessary fees!
If all these sound good to you, contact us today to start your 1-week free trial. Feel free to walk away if you’re not happy after 7 days!
