Factoring at Bank Rates

When I began my banking career in 1984, major banks had major factoring divisions. There were some major independent factoring companies still which eventually were acquired by the bank, although a few major factoring companies remained independent. Interestingly, I remember during a stint in my credit training with the factoring division of a major Dallas-based bank holding company, that their factoring rates were somewhat high.

I was used to working in the bank’s middle and national markets where rates were pegged to prime rate or LIBOR, but in the factoring and asset-based divisions, I saw rates that included huge commitment fees, fees on the unused or unfunded portions of asset based lines of credit and factoring commissions of 2% to 2.5% plus interest. Typical interest rates on factoring and asset-based loans were Prime Rate plus four to five percent. The factoring industry was booming and factoring clients were paying banks effective annual rates of 25% to 30%, depending on their accounts receivable turnover ratio. No one was complaining. Clients could not sign up fast enough. That was 1984.

Today, in 2009, competition among banks and factoring companies, combined with historically low interest rates has made the cost of factoring about half of what it was in 2009. In addition, technological improvements and efficiencies have allowed factoring companies to provide better service and a broader range of services than what they were able to deliver in 1984.

Factoring companies today can provide credit approval in minutes on the phone, deliver reports on line via web sites 24/7, and transfer funds with the push of a button. If factoring companies received a reputation as an expensive financing vehicle in the ’80s, perhaps it was deserved, but if you are looking for factoring at bank rates, Interstate Capital would like to make the following comparison:

Interstate Capital Rates, 2009

Factoring Fee: .99%
Interest Rate: Prime Rate + 2% (floor of 8%)

MCredit (division of Mercantile Bank of Dallas), 2004

Factoring Fee: 2.5%
Interest Rate: Prime Rate + 4% (approximately 14%)

Contact Interstate Capital to see if your company qualifies for our .99% factoring fee. This program requires good-quality accounts receivable that turn over at least 8 times per year (45 days average collection or better), and average monthly factoring volume of at least $100,000. per month.

Author: Tony Furman
Copyright 2009
Interstate Capital Corp.

Factoring rates at 0.59%

More Factoring Articles

Factoring rates at 0.59%