Factoring Costs
Factoring costs can often be hard to calculate because many lenders only quote headline rates. At Smart Factoring Quotes we feel that these headline rates can be misleading.
When calculating factoring costs we feel it is important to consider the total costs involved in a facility over a 12 month period. Only then can you truly compare different facilities.
The problem of comparing different quotes for invoice factoring is further compounded in that different lenders have different names for certain fees and also have different ways of charging for what is effectively the same fee.
Headline rates can be misleading so we consider all fees including:
Service fee - this is typically shown as a percentage and it is applied to your gross turnover. Yes the VAT inclusive turnover is used.
Discounting fee - this is the cost of actually borrowing money and is usually quoted as a percentage over base rate. Please be aware of what base rate is being used and if any minimum base rate is any effect.
Arrangement fee - some lenders now charge an arrangement fee to set up a factoring facility.
Take-on fee - this is not really a separate fee but it is worth mentioning. The service fee is applied to the debtor book that is in place at commencement. This can be an important consideration when transferring factoring companies as you will have already paid a service fee on these invoices.
Survey fee - some lenders will charge for the pre-lend survey they undertake prior to making a formal offer
Audit fees - some lenders charge for their audits while others include them as part of the service. If they are charged separately it is important to consider both cost and frequency.
CHAPS fees - this is the charge for a telegraphic transfer of 'same day money'. These can vary quite dramatically so it is worth considering how often you would use this service.
Re-factoring fees - these are typically charged when invoices are recourse back to you after the factoring company have been unable to collect in the invoice. These can really add up as they are applied monthly by some lenders on any invoices over 60 or 90 days old.
Penalties - some lenders have certain administration requirements and if these are not met they will apply additional charges as penalties.
This list is by no means exhaustive and not all lenders charge all these factoring costs. In fact some lenders just charge a service and discounting fee and everything is covered under the service fee. They can sometimes look like the more expensive option until you look at the total costs of other offerings.
Don't be put off by this. Simply contact us at Smart Factoring Quotes/a> and we will walk you through you different options ensuring that you fully understand the total costs involved in any factoring facility.
At Smart Factoring Quotes we can quickly evaluate total costs and set these out in an easy to understand matrix that will allow you to make an informed decision, so why not give us a call on 0845 863 0738.
