Discount Factoring

If you are considering selling some or all of your accounts receivable invoices, then you need to understand the details of factoring. In this article, we take a look at discount factoring.

What is discount factoring? Well, it is a term that is used in a sloppy manner, which causes a lot of confusion. The true definition of it is the amount you receive in total when you sell accounts receivable invoices to a factoring company. Another way of looking at it is the total of the invoices you sell to the factoring company minus all the fees charged.

APPLY NOW!

Figuring out the discount rate on the invoices you factor is impossible until after the fact. This causes a lot of confusion, but why is it so? Well, there reason has to do with time. The longer it takes one of your clients to pay the factoring company on an invoice, the higher the fee goes. As the fee rises, the discount gets bigger.

Another area of some confusion has to do with the initial advance. Let’s assume that a factoring company agrees to buy your invoices. It will not issue the total value of the invoices. Instead, it will give you a percentage of the value. This is often 70 to 80 percent. When the invoice is finally paid by your customer, the factoring company will then issue you the remaining amount minus its fees.

If you are considering factoring, we can explain the details of transactions and how they occur. Just fill out the APPLY NOW page and we’ll contact you to discuss financing your invoices.