![]() Some invoice factoring companies roll all fees into their discount rate, but it’s important to double check just what additional fees you may be signing up for. It is possible to negotiate a flat rate with your factoring company if your client has a proven track record of on-time payments, but the overall rate can end up being a bit higher. Most factoring companies use a variable rate structure, with rates raising the longer the invoice is outstanding. These rates are generally between 1% to 5%, though some companies like altLINE advertise rates as low as 0.50%. The discount rate is the cut the invoice takes as payment after the invoice has been filled by your client and the remainder of the invoice is paid to you. This rate can vary between industries, with general B2B businesses having advance rates of 70% to 85%, construction factoring around 80% to 90%, and trucking companies as high as 90% to 97%. The advance rate is how much you receive upfront from the sale of the invoices. You can use our Dollar Cost Calculator to compare proposals from competing factors. The most important rates to keep in mind while shopping for a factoring company are the advance rate and discount rate. Once the client fulfills the invoice, the factoring company then pays the remainder of the invoice to you, minus an agreed-upon finance fee (usually between 1% to 5%). Invoice factoring involves selling your client’s invoice to a factoring customer for an advance rate, or a percentage of the invoice amount upfront (most factoring companies have advance rates between 70% and 95%).
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