You see advertisements all the time promising invoice factoring rates less than 1.6%. When you’ve been quoted a fee rate of 2.75% for thirty days, the natural inclination is to jump to the :”lower priced” factor. After all, the 1.15% difference in the rate can result in thousands of dollars of savings per year, right?
Unfortunately, the accounts receivable factoring companies that offer these lower than normal fees make up for it by charging OTHER fees such as an origination fee, account maintenance charge, or other auxiliary costs. I’m not saying it’s wrong to charge additional fees, as long as it is fully disclosed at the outset. But many bury these costs in the fine print of the contract and that’s not ethical.
I work only with factoring companies that make it clear exactly what the client will be paying and you should too.
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