FAQ

What are the Costs Associated with Factoring?

Costs associated with invoice factoring include the factoring fee and ancillary fees.

Factoring fees can be a one-time, flat fee or a variable rate. Variable factoring fees, also known as the discount rate, are the percentage of the invoice you agree to pay the lender in exchange for immediate cash. Variable factoring fees can range from 1% to 5% of the face value of the invoice. 

Lenders charge lower fees if your invoices are current and if customers are likely to pay on time. Costs may also vary based on whether you choose recourse or non-recourse factoring, which determines who guarantees the invoice. Non-recourse factoring tends to be more expensive.

Lenders may also charge the following ancillary fees:

  • application fees
  • credit check fees
  • late payment fees
  • monthly minimum volume fees
  • transaction fees for ACH or wire transfers
  • lockbox or monitoring fees
  • unused line fees
  • renewal fees
  • termination fees

Factoring is one way to convert receivables to cash, but it can be costly. Consider alternatives to factoring receivables, such as setting up a trade credit program with Apruve.

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