What is the real cost of factoring ?
There are many ways to factor the accounts receivable. The most common two are involving a management fee plus a loan interest or simply a discount fee. There may also be a file fee required by some factoring companies. The first type includes a fixed account management fee usually at 2% plus a loan with an interest rate of prime plus 2 to 5 points depending on the risk involved and all the accounts receivable are managed by the factor. The second type, the discount fee, is a fixed rate applied to each invoice factored and is based on the number of days between the disbursement by the factoring company and the reception of the payment made by the customer. Also involved in the calculation of the discount rate is the monthly volume of invoices submitted for factoring. With this type of factoring, you have the latitude to offer only the accounts you want to finance. The discount rate usually varies from 2 to 6% depending on the volume of invoices factored. Please note that there may be a
