The type of deal you are offered by a factor is dependent on a range of business specifics, such as annual turnover, industry, range of customers you trade with and credit history. Factors then set stipulations as to how many invoices you can sell and how much they are worth and negotiating these service terms can lead to a better deal with some factors. So, if you can guarantee a certain number of invoices you may pay reduced fees or receive a higher percentage cash advance (typically, your factoring facility grows and you are offered a better deal as your business expands). However, one of the main advantages to factoring more invoices is the immediately improved cash flow for your business. And this can be used to take advantage of volume discounting deals with your own suppliers as you are in a position to buy larger units or to take advantage of supplier discounts for early payment.
- What are the cost components of a factoring arrangement?