Factoring rates

Top factoring companies focus on finding the right cash flow solution for each client and the right types of factoring rates for the client’s business. Factoring rates, which are quoted as a percentage of the invoice value, typically fall into two categories: tiered rates and flat rates.

Tiered factoring rates

Tiered rates change, based on the number of days before the factoring company receives payment from the client’s customer. Although the costs of factoring will vary, tiered rates do offer business owners more flexibility. Tiered rates will be a bit more complicated to calculate or predict, but they can be more economical if your customers pay earlier than anticipated or if you choose to hold an invoice, say for the first 30 days, before submitting to a factoring company for your advance.

Here’s how tiered rates work:

  • Submit your invoice to the factoring company and receive an advance, which might vary from 80% to 95% of the invoice value.
  • Once your customer pays the invoice, the factoring fee is deducted and the remaining balance is sent to your reserve account.
  • At a top factoring company you can access the funds in your reserve account at any time during business hours.

Flat factoring rates

Flat rates are fixed and predictable. Flat rates give you the peace of mind of knowing how much you will pay for the convenience of instant income for work you have completed. The factoring company bases the flat fee percentage on the number and value of invoices submitted for payment. More invoices and higher dollar values translate into lower flat fees.

Here’s how flat rates work:

  • A top factoring company could advance you as much as 80% to 95% on your invoice, minus the factoring company’s predetermined fee.
  • For instance, if you submitted a $1,000 invoice to the factoring company and you were working with a 4% flat fee, you would pay $40.
  • No matter how long it takes for that invoice to be paid within a certain number of days (usually 60 or 90 days), your fee would remain $40.
  • After your customer pays, the flat fee is deducted and the remaining invoice balance is sent to you.

Find a factoring company with professionals who will be very clear about your advance and your factoring rate and what it covers. Ask questions until you fully understand all benefits and any fees for special services such as wire transfers. Find a partner who will work with you to grow your company and increase your profitability. Since 1993, Interstate Capital, one of North America’s top factoring companies, has helped 10,000 businesses improve their cash flow.

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