The cost of factoring – and how to off-set these expenses

The cost of factoring – and how to off-set these expenses


The cost of factoring – and how to off-set these expenses Are you gearing up for a new growth phase in your business? Or are you struggling to make ends meet as you wait for your customers to pay their invoices? There are many reasons why companies choose to factor their invoices.

As a business that is exploring factoring as a potential working capital solution, you may be concerned about the cost of factoring.

How much does it cost?

Every factoring company has its own rates. With Merchant Factors, you pay an administration fee plus a discount or interest rate. These amounts are discussed and agreed on upfront, so there are no surprises. The final rates offered depend on how the service is structured, the volumes of invoices and the overall creditworthiness of your customer base.

Typically:

  • The interest rate ranges from 2-3% above the prime lending rate on the working capital that is advanced until the invoice is settled by your customers
  • The administrative fee ranges from 0.5% to 2.5%

There are no hidden costs. And these expenses can be off-set by a series of benefits that your business will access when partnering with Merchant Factors.

Here are five reasons why factoring with Merchant Factors is more cost-effective than you may think:

  • Fast access to capital

    Everyone knows that time is money. What does it cost your business to wait months before you can release the cash that is tied up in your debtors’ book? Does poor cash flow mean you have to side-step new business opportunities? Even worse, do you put your relationships with suppliers and other partners under strain due to late bill payments? With factoring, there’s no need to suffer through your lengthy credit sales terms. You can unlock your capital when you need it.

  • Early settlement discounts

    Many businesses off-set the cost of factoring by asking for early settlement discounts from their suppliers. Having the working capital at hand to pay cash on delivery may enable you to negotiate as much as a 5% discount on purchases.

  • Earn more money

    The more working capital you have, the more you can invest in your sales growth. Factoring helps you to expand your business by investing in new product lines, increasing stock levels, accepting more orders and buying new technology, tools or equipment.

  • No need to compromise equity or control

    With factoring, you can access funds without selling an ownership stake in your business. You can use the capital to grow your business and invest the profits back into your own company.

  • Save resources in the back office

    With Merchant Factors, you have a professional debtor administration team taking care of your accounts. This means that you and your senior staff spend less time dealing with credit control paperwork and collections, saving you more time to generate new business. You also save on overheads in your accounts office.

  • Build a good reputation

    Many business owners believe that a good reputation is a valuable asset. Factoring gives you the working capital to cement your good standing in the market, by paying your bills on time and never having to compromise on quality to cut overhead costs.

  • Are you ready to free up your cash in a way that adds value to your business?

    Merchant Factors has been supporting growing businesses through factoring since 1988 – with flexible working capital solutions that are tailored to suit unique operational cycles and financial goals. For those who need swift access to capital, this efficient and wholly independent factoring firm is able to offer the shortest turnaround time in the industry from application to pay-out.

    For fast, flexible business finance – contact Merchant Factors today

    Finance beyond the Numbers.