Factoring companies – the true cost of factoring

Factoring companies quote their costs as a commission rate expressed as a percentage of turnover plus an “interest” charge based on their funds invested so it would be natural to assume that the factoring company with the lowest rates would be the cheapest. Unfortunately that is often not the case at all.

“Interest” is payable on the advance until the customer pays his account which means that despite two factoring companies quoting the same interest rate the one that has efficient and effective credit control will collect in overdue accounts quicker than the factoring companies that just send out computer generated letters that end up straight in the bin and the net result of that will be a much lower “interest” bill.

A new way that the factoring companies have found to increase their own income is by charging renewal fees to their clients. So far this wheeze has been restricted to some of the major bank owned factors but we have no doubt that eventually it will catch on in the independent sector.

trapped with the wrong factoring companyMany factoring companies will also charge for a range of other services like increasing the facility limit or the customer credit limits and one or two of the more unscrupulous factoring companies will deliberately set low limits and then charge to review them.

Factoring Solutions is here to ensure that you don’t get trapped with the wrong factoring company. We don’t charge for our services under any circumstances and we will happily introduce you to the right factoring company for your particular circumstances so please give us a call on 01827 707680 for a friendly chat with no obligation whatsoever.