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 Depends on Volume
Factoring discounts vary widely depending on the average invoice size, average monthly volume, and on how long it takes your customers to pay. Keep in mind that it requires just as much work for a factor to account for a $1,000 transaction than one for $10,000 or $100,000. Therefore, the discount for factoring smaller invoices is higher than for larger invoices. As you would expect, the cost of factoring also decreases as volume increases.
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About the Discount
The discount you can expect on small invoices that pay off in 30 days is around 5%. For example, with us you can expect the discount on a $1,000 invoice to be around $1.50 per day. If your business factors $50,000 worth of invoices, the discount for a month is about 4%. With a volume of $100,000, the discount typically drops to 3% per month. With high volumes, the discount drops to 2% or less.
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Weigh Cost Against Benefits
You need to weigh the cost of factoring against the potential benefits. The question is, given the cost, does your business have the opportunity to use the extra money profitably? In other words, whatever the money costs, can you cover that cost, plus make more profit as a result? If so, factoring pays. If not, factoring costs.
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