COST

Depends on Volume

Factoring discounts vary widely and depend on the creditworthiness of your best customers, your average invoice size and monthly volume factored, and on how long it takes your customers to pay. It costs more to factor smaller invoices and volumes. Conversely, with larger average invoice sizes and volumes, factoring costs less.

About the Discount

The fee lenders charge for the use of money is called interest. In contrast, the fee factors charge is called a discount. The discount is based on the face value of the invoices that are sold. For example, if a company decides to sell some invoices for 95 cent on the dollar, to get some cash-- immediately, the discount or fee is 5%.

Weigh Cost Against Benefits

You need to weigh the cost of factoring against the potential benefits. Only you can determine whether the benefits are worth the cost. Factoring can help companies grow or survive. With sales being off dramatically for most businesses, sales growth would be a nice problem to have. Thus the primary benefit of factoring right now is the extra cash it can provide to help your company survive.