Factoring and Invoice Discounting

What is factoring and invoice discounting - and how do they work for business? Is4profit takes a look

3. The costs of factoring

3.1 Finance charges should be comparable to an overdraft.

  • Typical charges on the amount financed range from 1.5 – 3 per cent over base rate, with interest calculated on a daily basis.

3.2 Credit management and administration charges, including the maintenance of your sales ledger, depend on your turnover, the volume of your invoices and the number of customers that you have.

  • Typical fees range from 0.75 – 2.5 per cent of annual turnover. A company with 50 live customers, 1,000 invoices per year and £1 million turnover might pay 1 per cent.For invoice discounting, where finance alone is provided, administration fees range from 0.2 – 0.5 per cent of annual turnover.

3.3 Credit protection charges (for non-recourse factoring) largely depend on the degree of risk the factor associates with your business.

  • Typical charges range from 0.5 – 2 per cent of annual turnover.

BHP Infosolutions

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