Here we provide you with some examples of how the fees and funding can work. If you are interested in receiving an exact quote for factoring your invoices, please fill out our very simple getting started information form. A factoring specialist will contact you for a free consultation to tailor a factoring solution and fee structure that best fits your business. The information is free and the quote is yours to accept or decline.
Sample Fee Structure and Funding
When you send in an invoice to be Factored you will usually receive between 70% and 90% funding of the invoice amount within 24 hours after the invoice has been verified (depending on the invoice amount and the business paying the invoice). This is your advanced funding. Advanced funding is wired to your business bank account.
Discount Rate = Factoring Fee ( ESTIMATE Not our actual Cost)
The Factoring fee can range between 2.5% and 3.5% per 30 days, or .1% per day the invoice is unpaid after factoring. Keep in mind that factoring fees are tailored to the individual needs of your business and customer base.
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).
let’s say you have a customer ABC Company that owes your business $100,000 for a shipment of your widgets just delivered. ABC Company is a large customer that has good credit but they never pay their suppliers (you) any sooner than 45 days. Instead of anxiously waiting 45 days to get your $100,000, this time you decide to use Factoring to improve your cash flow. The Factoring Company verifies your invoice to ABC Company and you receive 80% of the $100,000 ($80,000) within 24 hours, wired to your bank account. If you have a discount rate similar to the sample shown above and ABC Company pays the $100,000 invoice in about 45 days, this equals a factoring fee of 4.5% of the original $100,000 ($4500). Since you have already received an advance of $80,000 from the factor, you will receive the remaining $20,000 minus the factoring fee of$4500 ($15500). Therefore, in the end you collected $95500 of the original $100,000 invoice. However, this time you did not have to wait the usual 45 days to get your money. This time you received $80,000 up front in one day, and collected the remaining $15500 in 45 days.
Contact our finance specialists to discuss your needs.
Companies facing a cash-flow squeeze and slow-paying customers often sell their invoices or accounts receivable to specialized companies called factors. The factor advances most of the invoice amount — usually 70% to 90% — after checking out the credit-worthiness of the billed customer. When the bill is paid, the factor remits the balance, minus a transaction (or factoring) fee.
Companies that use factoring like it because they get money quickly rather than waiting the usual 30 or 60 days for payment. After sending an invoice to a factoring firm, a business can have money in its hands within 24 to 48 hours.
Some businesses use factoring to get started. Whereas banks focus on a business’s creditworthiness in considering whether to make a loan, factors look at the financial soundness of a business’s customers. As a result, firms with scant credit history may be able to sell their invoices.
But the service can be costly — several percentage points more than a conventional lender. It was once a controversial source of financing because of its ties to financially fragile companies in the garment industry. A related commonly held impression is that a company uses a factor because it isn’t credit-worthy enough to deal with a bank.
Now billions of dollars in accounts receivable flow through factors each year, many of whom specialize in particular industries such as trucking, construction or health care. Some companies use it to meet cash-flow needs as a stop-gap measure. Others prefer factoring to banks, which often require more paperwork, or other outside investors, who may want a piece of the business.
Factoring isn’t likely to be economical for a firm that sends out thousands of small-denomination invoices, because of the service fees a factor may assess for reviewing each one for risk.
Since the factoring firm handles collections, the factor customer doesn’t have to worry about billing and credit checking and about staffing those functions. Another advantage: Companies wanting to expand overseas may find factors often already have extensive experience dealing with overseas suppliers or purchasers and so using factors can make international business efforts a lot easier.
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Nork Capital Trading Llc
2550 NW 72nd ave STE 113
Miami, Florida 33122
FAX: (305) 434-8329
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