A flat factoring rate means the percentage you pay on each factored invoice is always the same. There are two main types of factoring rates: flat rates and tiered rates. Are There Different Types of Factoring Rates? Additional things that might be considered by some companies are your credit score (as the business owner), how long you’ve been in business and your annual revenue. You’ll get a lower rate with a more diverse book of customers, especially if most of them have good credit.Įach of these factors can be broken down into more specific details which will impact your overall factoring rate. It’s often less risky for a factoring company to buy several small invoices from multiple customers than buying a couple of very large invoices from a business with only two customers. The diversity of your customer portfolio is also considered when calculating risk.

As such, non-recourse inevitably comes with a higher factoring rate. Non-recourse is when the factoring company takes on more risk of non-payment. For example, within factoring, there are two primary types of agreements – recourse and non-recourse. Risk – Increased possibility of risk is usually offset by a comparatively higher rate.This means that as you increase your monthly volume, your factoring rates automatically decrease. You may even get set up with a tiered plan for rates depending on your anticipated growth. Typically, the more you factor, the lower your rate is. Volume – When determining your rate, a factoring company will likely ask how much you plan to factor per month.

Because of this, factoring rates for trucking companies may be relatively lower when compared to other industries, such as textiles or staffing.

Industry – when setting factoring rates, certain industries (like trucking and transportation) provide a more reliable and high-volume stream of billable invoices.

Generally speaking, a factoring fee structure is influenced by the following: As the primary cost to factoring, you should fully understand what a factoring rate is and how it’s determined. You sell your invoices to receive dependable cash quickly and the factoring company charges a per-invoice factoring fee called the factoring rate. When partnering with a factoring company, you are entering into a mutually beneficial relationship intended to create success for both parties.

Invoice factoring costs