Trade Finance Forum › Forums › Trade Finance › Companies › How are the Factoring Rates determined by the trade financial institution? › Reply To: How are the Factoring Rates determined by the trade financial institution?
I’ve learnt that Flat, tiered, and prime plus factoring rates are the three most popular forms. A number of factors, such as your monthly billing quantity, your industry, and client payment patterns, are used to calculate factoring rates.
In general, factoring charges are based on how much total invoicing you can sell. The lower the rate you’ll pay, the greater monthly volume you factor.
A factoring company takes on the liability that your client will pay them when they buy your invoice. Because of this, your pricing will be impacted by your customer’s credit. The provider will demand more for the increased credit risk if you select non-recourse factoring.
In all forms of funding, especially factoring, “time is money” Your rate will be influenced by the payment terms you’ve agreed upon with your client and the factor’s prior dealings with that account debtor.