Global Funding Resource

We bring liquidity to your company without creating debt!


Call Us Today At (800) 837-3950
  • Home
  • About GFR
  • Site Map
    • Bank rates -vs- Factoring Fees
    • Common Objections To Factoring
    • Common Terms Used When Factoring
    • History Of “Factoring Industry”
    • Our Mission
    • Privacy Policy
    • What Will My Clients Think?
    • Why Use GFR?
  • Factoring Info
    • How Invoice Factoring Works
    • Benefits of Factoring Invoices
  • FAQ
    • Frequently Asked Factoring Questions
    • Frequently Asked Questions Part 2
  • Articles
  • Apply
  • Contact Us
  • Government Contractor Funding
  • Vendor Instapay Program
  • Medical Receivable Funding
  • What is Asset Base Lending?
  • Purchase Order Finance
You are here: Home / Bank rates -vs- Factoring Fees

Bank rates -vs- Factoring Fees

Bank Rates vs. Factoring Fees

When prospective factoring clients compare factoring to automobile or mortgage lending rates, factoring initially appears expensive. Prospective clients tend to annualize the points charged, equating 3% per month to an interest rate of 36%. This is both an incomplete and incorrect comparison. First, factors purchase accounts receivable at a discount. They do not lend money. The paper is short-term in nature and management intensive versus a bank loan, which is secured against some stable asset and usually advanced once. Factors are continuously advancing and collecting accounts receivable, providing clients with ongoing reports, credit due diligence, and personalized account management services.

Example 1: If you sell a product or service to your client for $1,000.00, once a month for 12 months and within that invoice for $1,000.00 you have included a 10% profit margin. Does that mean at the end of 12 months you have earned 120% profit; of course not. The same applies to the factoring fee, if you pay 3% of that same $1,000.00 it would be $30.00 per invoice. At the end of 12 months you would have paid $360.00 of factoring fees which is 3% of $12,000.00.

Example 2: When prospects make this comparison, we ask them to look at the amount they offer for early payment. If the standard 2% discount for payment within 10 days is annualized using the thirty-six 10 day periods in a year, they have lost 72% interest. Are they really losing 72% for early payment? Of course not…It is more appropriate to look at the opportunity cost of the funds. If the funds cost 3% per month and you can take them and generate more than a 3% return or save more than 3%, then factoring may be the best alternative. What amount of return is generated when a company has an order but no way to fill it? The answer is none. How much return does a $35.00 overdraft fee generate? A business must weigh the costs of factoring against not having the immediate cash flow. Most often the choice is between factoring and putting up with severe cash flow problems and missed sales opportunities.

 

 

 

 

 

 

Contact Us

Global Funding Resources
3490 Lawrence
Northbrook, Illinois 60062
Phone: (800) 837-3950
 
We invite you to call our office or send an email using the contact us page.

Bank Rates vs Factoring Fees

Get Paid on Invoices Now!

  • Up to 95% Advance Rates
  • Factoring Fees as Low as 1.5%
  • 24 Hour Funding on Approved Invoices
  • Pay Bills, Fund Growth and Increase Profits!

Benefits of Factoring

1. Cash Without Debt
2. No Long Term Contracts
3. Strong Financials Not Required
4. You Control How Funds Are Used
5. Pick and Choose The Invoices to Factor

Learn more about these factoring benefits!

Connect With Us Online!

  • Email
  • LinkedIn

[footer_backtotop]

Privacy Policy . . . .Contact Us . . . Log in