The cost of invoice factoring is dependent on multiple factors. While the service isn’t free, it’s important to note that opting for the “cheapest” factoring companies often means sacrificing quality of service. Charter Capital offers competitive rates with a commitment to excellent service, ensuring that when used properly, invoice factoring can more than pay for itself. Typically, factoring fees and rates are lower than the interest you would pay on a loan. The idea is to have cash on hand for essential business functions rather than chasing customers and waiting for payment on their unpaid invoices.
The typical factoring cost is a few percent of the invoice amount, depending on several components such as:
- The volume of factored invoices.
- How long your customers take to pay.
- The total dollar value of the invoices to be factored on a monthly basis.
Some of our factoring fees are as low as one percent. Regardless, when you use Charter Capital, the growth of your business should more than compensate for the factoring costs, thanks to our focus on providing outstanding service and competitive rates.
How Do You Know Charter Capital is the Right Company for You?
Charter Capital is a factoring firm that can help small and medium-sized businesses keep their cash flowing. We provide the business finance your company needs at rates that offer great value without cutting corners in service.
The Role of Customer Credit in Invoice Factoring Rates
One of the most overlooked factors in determining your invoice factoring rate is the creditworthiness of your customers. While many assume that factoring companies base approval and pricing on the business owner’s financial history, that’s rarely the case. Since invoice factoring involves advancing funds based on your accounts receivable, the factoring company is primarily concerned with how likely your customers are to pay their invoices on time. The stronger your customers’ payment history, the lower the risk, and the better your potential rate.
This is especially important when comparing recourse and non-recourse factoring options. In non-recourse arrangements, the factoring company assumes the risk of non-payment, which can increase the cost of factoring if your customers are considered higher risk. Companies that offer non-recourse factoring typically evaluate customer payment behavior closely before finalizing rates. For trucking businesses and other industries with extended payment cycles, this evaluation can significantly impact the total cost of factoring.
When choosing a factoring company, consider how they assess customer credit and how it affects both the advance rate and the percentage of the invoice you’ll retain. The right factoring partner will help you understand this process clearly, ensuring the rate reflects the actual risk, not just a flat fee.
The Hidden Factors That Influence Your Factoring Fee
While the cost of factoring is often quoted as a flat percentage, the final fee is rarely one-size-fits-all. Beyond invoice volume and payment terms, several hidden variables can influence what factoring companies charge. One significant factor is the invoice value concentration. If your business relies heavily on a small number of clients, your risk profile increases. Factoring companies may raise rates in these situations because a default from just one client can have a major impact on your cash flow and theirs.
Industry type also affects pricing. For instance, freight factoring for trucking companies tends to be priced differently than factoring for wholesale or staffing. This is because the trucking industry often deals with longer payment terms, high operating costs like fuel, and fluctuating cash needs. As a result, factoring providers that offer freight factoring build these risks into the fee structure.
How Invoice Factoring Works When You Choose the Right Factoring Company
At Charter Capital, the entire factoring process is very simple. Your first step is to contact us. Give us a call or fill out our online application. This process should take you just a couple of minutes, and we will be able to contact you with pricing in less than 24 hours. Once we have set you up with a Charter Capital FactorLine, obtaining cash for your accounts receivable in less than 24 hours is simple and easy.
- You continue to provide your service or product to your customers just as you always have.
- You continue to invoice your customers as always.
- You send your invoices that you want to factor to Charter Capital, along with our simple factor form.
- We don’t care about your credit score, only the creditworthiness of your customers.
- We wire your funds directly into your bank account, usually in 24 hours or less.
- We wait for your customer to pay us and notify you on the same day we receive payment.
- You continue to grow your business without cash-flow worries.
Benefits of Doing Business with Charter Capital
Factoring is essential to the growth of your business. Charter Capital’s competitive rates and excellent service mean that you can avoid many of the limitations placed on your business by traditional lenders and financing methods. Charter Capital allows you to grow your business without selling equity or giving up control of your company. To find out more about our invoice factoring services or to get a better idea of our invoice factoring fees, request a free rate quote.
