Sometimes the funder might ask for additional security to go ahead with an invoice finance facility. There are many other factors which could affect the quote you’re given, and it’s worth considering: Security Invoice finance types: other factors which affect the cost This varies depending on the lenderĪs with any finance facility, be that personal or commercial, it’s always advisable to look at the total cost of a facility over a period of time, rather than just the interest rate (discount charge), as the service fees might add up so that the overall cost is much more. Other charges associated with invoice finance could include administration, due diligence and compliance fees. In the case of invoice financing, also referred to as invoice discounting, its your responsibility to chase up and collect the payments. This is the interest charge on the invoice finance facility it might be built in to the service charge, but typically the main bulk of the fees Additional charges This is a fixed fee charged in an annual or monthly basis, normally a percentage of annual turnover Discount charge Here are the main ones and what they actually mean: Service charge Once you’ve received a quote from your lenders, there are several fees associated that you might be quoted. Invoice finance is a general term used when a third party agrees to lend you money based against the value of your unpaid invoices. Administration required – if the invoice finance facility is more complex (multiple invoices, multiple countries, different currencies), it could increase the administrative cost associated.Previous history of cash flow handling in your business – if you can demonstrate good practise of collecting debt from customers, and controlling credit in your organisation, this is likely to work in your favour.If your end customers are reputable buyers (e.g., well known supermarket chains or retailers), or your business is creditworthy (no bad debt, makes payments on time, has considerable security and good cash flow), the risk of lending is lowered Credit worthiness of your end customers, and also your own business.Industry or sector your company is in – many industries which are volatile or seasonal, or perhaps those where the customers are known to pay late (e.g.Risk of lending to your business could be assessed in many ways, here are the key indicators that might affect the cost of the invoice finance product: Invoice finance is generally considered as low risk as the project has been complicated or goods produced, so the interest rates charged will almost certainly be lower than unsecured loans.
#Invoice factoring quote driver
The main driver of rates for invoice factoring and discounting is the lender’s exposure to risk. We’ve put together a quick guide on the key considerations when looking at factoring or discounting quotations.
Terminology varies between funders, and can often get complicated.
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