Getting access to working capital quickly can be costly and many businesses struggle to assess the true cost of the funds that they are receiving. When you are considering factoring services, you would be wise to first get the entire picture of what you will be charged. Today, the smart money is often not on the lowest advertised rate, but the best service. Finding the right level of service actually can save you money on some costs of doing business.
For instance, when looking for a good invoice factoring program for your business, consider the following costs.
- Factoring rates: The factoring rate is the percentage of the invoice that the factoring company will keep for their services in exchange for you receiving your funds earlier. Another way to think of it is the percentage that the factoring company discounts your invoice. It’s similar to the interest rate that will be charged if you borrowed money from a bank.
- Service fees: Since the work involved in collections and optional invoice preparation will be moved from your business to the factoring company, some factoring companies charge a fee for this service. Other companies incorporate those services in their overall factoring rate. You may find that you will save money by not having to pay your own staff or an outside agency for these back-office tasks.
- Credit protection fees: Factoring companies assess the creditworthiness of your customers before agreeing to factor their invoices. They can perform credit checks at little or no cost to you and you will not need to purchase credit insurance or subscribe to credit reporting systems.
- Money transfer fees: Some factoring companies have different charges for electronic money wire transfers and ACH transfers; others do not. Sometimes the additional cost will be worth it to you to have faster access to your cash, so this could be cost-effective in some situations.
As you can see, the factoring rate is only one cost to take into consideration as you compare factoring companies. You may also recognize savings in both time and money through factoring your invoices, so those savings should be considered as well.
If you’re looking for great factoring rates coupled with expert services and additional benefits, then contact Interstate Capital for a factoring rate quote today.