In exchange for this fee, you will receive a cash advance for a portion of your accounts receivables. The upfront payment usually represents 70 to 90% of the total invoice amount. You will receive the remaining balance once the invoice has been paid and factoring company has taken their fee.
If your company is short on cash or needs an influx of cash, invoice factoring (also known as accounts receivable financing) may be a worthwhile option to consider.
Invoice factoring fees will depend on:
1.) How much risk is involved
Will the factoring service be able to collect on your accounts receivable? How much risk are they taking on?
2.) Company size and industryHow large is your company? What is your annual revenue? Rates can vary significantly by industry. For example, construction factoring can be very different than freight factoring. It helps to work with a company that has experience working within your industry.
3.) Length of factoring period When are the invoices due? 30 days? 60 days?
4.) Average invoice amount
What does a typical invoice look like? Is it closer to $1500 or $15,000? Factoring fees may be higher for smaller invoice amounts.
5.) Invoice volume How many outstanding invoices would you like to factor? Some companies have may have a minimum volume requirement.
6.) Initial setup fees
In some cases, there are startup costs associated with beginning to use factoring service.
7.) Length of contract How long are you planning to use the factoring company? Six months or 3 years? Fees may be lower for companies willing to sign a long-term contract.
| Estimated Factoring Rates by City |
|---|
| Baltimore, MD | 2.38% - 3.06% |
| Boston, MA | 2.64% - 3.39% |
| Chicago, IL | 2.33% - 2.99% |
| Columbus, OH | 1.83% - 2.36% |
| Houston, TX | 1.83% - 2.36% |
| Indianapolis, IN | 1.74% - 2.23% |
| New York, NY | 4.31% - 5.55% |
| Oklahoma City, OK | 1.82% - 2.35% |
| Philadelphia, PA | 2.52% - 3.24% |
| Phoenix, AZ | 2.00% - 2.58% |
| Portsmouth, VA | 2.26% - 2.91% |
| San Francisco, CA | 3.26% - 4.20% |
| Seattle, WA | 2.42% - 3.11% |
| Free Invoice Factoring Cost Estimates |
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