Factors That Affect the Cost of Hiring a Factoring Company

By: Chris Lanchech

discount fee, factoring company, cost of factoring
A factoring company can be the best solution for your company’s financial needs if your business currently requires a very quick infusion of cash.

A factoring company can be the best solution for your company’s financial needs if your business currently requires a very quick infusion of cash. Factoring companies can advance you the money owed by your customers, for a fee. This fee is called the discount rate, as it is the percentage of the face value of an invoice.

Generally, the discount rate can range from 1% to as much as 5% of the value of the invoices you submit to the factoring company. The discount rate is affected by several factors, including the following:

Factoring Service Fees

Some factoring companies may require their clients to pay a setup fee to avail of factoring services. These fees commonly range from $500 to $2000, which may help offset the costs, time and effort of running credit checks, assessing the customer’s ability to pay his debt, and validating the invoices. However, there are some factoring companies which do not require setup fees.

Your agreement with a particular factoring company also specifies if you are availing of recourse or non-recourse factoring. Non-recourse factoring is more expensive, as it allows you to pass on more of the risks of unpaid accounts.

Your Industry and Clients

The type of industry your business is in can affect the discount rate offered by factoring companies. Some industries involve more risk when collecting money is involved, and examples of these include the garment and textile industries.

If your industry is considered a high-risk field by factoring companies, then the costs for your company may be greater. Factoring companies may demand a higher discount rate as their fee, and they may even put a cap on the total money they may advance to your company.

Some clients are also riskier for factoring companies. Just as your personal credit rating and history is crucial for securing a loan and determining the interest rate, the reliability of your customers may also help determine the discount rate that factoring companies require. If your customers have a spotty repayment history and credit rating, then the discount rate invariably increases.

The Number of Invoices You Submit and Type of Billing

The greater the number of invoices you submit to factoring companies, the greater their workload becomes. Consequently, the discount rate will also increase.

A sum total of $100K in accounts receivables will come with a higher discount rate if it involves a hundred accounts of a thousand dollars each. But if that sum total involves just two accounts of $50K each, then the fee may be significantly lower, because the factoring companies do not have to contact as many customers to collect the money owed.

The method in which customers use to pay their accounts will also be a factor in determining the discount rate. If progressive billing is involved (in which customers pay in installments instead of paying in full at once), then the discount rate increases because the factoring company has to do more work.



Payroll factoring | payroll factoring tips

Welcome to our Blog, this article is about payroll factoring, and the advantages/ tips of factoring your invoices to meet payroll.
On the list of effects of the recent recession is this : companies have turn into more guarded and conservative with their cash flow. One example is, lots of large companies are preserving cash by paying their invoices more slowly. In turn, it’s affected smaller companies who rely on steady predictable cash flow to be in a position to meet their obligations. Likewise, smaller companies are doing the same thing and trying to pay their invoices slowly as well. Ultimately, everyone’s cash flow is being affected.

The issue with this is that many small companies live invoice-to-invoice and a delay in invoice payments can quickly send their finances into trouble. And since few small companies have any meaningful cash reserves, a delay may effect their ability to pay suppliers – and more significantly – their ability to meet payroll. Missing payroll can have substantial negative effects that could ultimately lead to the closing of the business.

Your first line of defense to avoid a cash flow absence is to build a cash reserve. This can be easier said than done because most small businesses don’t have the means to build a cash reserves. When you can build a cash reserve, your company will be in a better position to weather the inevitable storms that will hit your cash flow. If building a cash reserve is not an option, then you should think about using a business financing solution that can allow you to cover payroll and other expenditures if things get tight.

Invoice payroll factoring is a business funding solution which might be used to correct cash flow issues relatively quickly and with out the hassles associated with standard financing. It works by repairing the problem at the source. It provides you a cash advance for your slow paying invoices, providing the liquidity you need to meet payroll and other crucial expenses. With an invoice factoring solution you can get rid of the uncertainty of client payments, permitting you to obtain a more predictable cash flow.

Among the advantages of factoring is the fact the most crucial thing you need to qualify for this type of financing is solid commercial customers. It’s ok if your customers pay slowly and gradually – provided that they pay dependably. Besides from this, your company needs to be free of legal and tax issues. And factoring can be deployed fairly quickly – usually in a week or two.

An additional advantage of factoring is that it’s dynamically tied into your sales. This means that it can be increased easily as your sales increase, provided that you are invoicing credit worthy customers. This makes invoice factoring the perfect solution for small companies with good prospects that are hindered by cash flow problems.


Visit NeeBo Capital today!

Property Factoring and Property Management Funding

One of the major consequences of the present real-estate clutter is it has increased demand for property management companies. Normally, a bank is in charge for the routine maintenance of properties that are repossessed. Banks and real estate businesses usually delegate these tasks to property preservation companies who ensure that these properties are kept in excellent condition in order that they can be sold at a later time.
Nearly all property management companies have employees that handles all maintenance tasks. They furthermore have a steady supply of supplies that are used to fix up properties. Fixes can range from simple items, such as pain jobs, to more intricate plumbing and electricity jobs. Most banks and real estate firms do no pay for these services in advance though. Instead, they ask to be billed on net 30 to net 40 terms. This means that the property management company is accountable for paying staff members and vendors while waiting around to get paid by the bank. The problem – few business owners can afford to wait.

We have the solution, You might delay paying vendors or maybe you could try and build a cash reserve to cover payments when you wait to get paid. A better remedy may be to get Property Factoring to help cover your obligations. NeeBo Capital property management funding and loans option will get you on track in no time. Our solution that works well for this problem and integrates well with the industry is invoice factoring financing. It provides the equal of a quick payment, getting rid of that 30 day wait to get paid and fixing your cash flow. It works by using an intermediary financing company that stands between your company and your customer. The NeeBo Capital factoring company provides you with an advance against your invoice and then waits to get paid by your customer. Once your customer pays the invoice the transaction is settled and closed.

If you are in the property management business and you are looking for a loan, property Factoring, or funding to meet payroll or cover expenses give our staff a call today!

Good Websites to Help Grow Your Business!

Today, we’ve all had lengthy one-way phone dates with elevator music on loop, waiting to feel as if we matter, at least for long enough to plead our case or demand a refund. But there are also some businesspeople out there who have discovered how to use new online tools to their advantage when dealing with customers. Here are a few examples that are worth noting — you may be able to save some time and money for not only your customers, but your business as well.
1. ZocDoc: Getting Ahead of Complaints


ZocDoc, a startup that allows users to book appointments online with doctors based on insurance carrier and location, has the added challenge of interfacing with a dauntingly complex industry — health care. Even if they execute their part of the process flawlessly, doctors can still cancel or move appointments, and the end user’s experience suffers. Rather than making excuses, though, ZocDoc takes proactive steps to maintain customer satisfaction. If an appointment is changed on a patient, ZocDoc makes a phone call to that patient to apologize and offers a $10 Amazon.com gift card, no strings attached.


Online businesses don’t have the luxury of face-to-face interaction when building relationships with customers. But this kind of unanticipated extra attention is a good step towards making the user feel cared for before he or she has an opportunity to develop a negative opinion of the experience. “Be proactive, not reactive,” says Anna Elwood, director of operations for ZocDoc. “Don’t wait for problems to occur, find them before they do.”


2. Square: Adding a Personal Touch


Square, a service that helps users process payments using their mobile devices, is expanding, according to a spokesperson for the company. But at a healthy 140 employees, they seem to have maintained something that many smaller companies have lost: a personal touch.


It’s crucial for Square’s customers to know that support is available when they need it, since the ability to accept payments is something a small business can hardly do without, even for a short time. When that moment came for food truck marketing director Angus Gorberg, Square was ready with support that made him feel he was in good hands. “I’m not sure how large their team is over in San Francisco, but my feeling has always been like it was small in the best way possible,” Gorberg says. “And the kicker? All of this conversation was through email. What else would you expect from a tech startup?”


3. Dell: Pointing People in the Right Direction


For companies that get a lot of different service requests that vary in urgency and topic, it can be difficult to effectively direct customers to the department or representative best suited to fix the problem. But there’s nothing more frustrating to a consumer trying to get an answer than being bounced around from person to person to no avail. This is one of the (somewhat diverse and numerous) ways Twitter can be useful in a customer service context — as a first point of contact that helps funnel users in the right direction. Dell, a large company that might very well have you wait on hold for several minutes if you were to call, has a team on Twitter that replies promptly. Then, if necessary, a social media outreach team member reaches out to follow up. Not only does this approach help to minimize the number of angry, frustrated people venting publicly on Twitter, it also helps people with quick questions to skip the phone altogether, freeing up a representative to speak with someone who has a more detailed request.


4. Bimo Marketing: . Top Pay-per click


Rarely do we think a marketing company can really help our bottom line. Most business owners view marketing as a way to get more exposure and if they get business out of it, it is an added bonus.

The guys at Bimo Marketing have delivered over 300,000 qualified leads for their clients. These guys are good, they start you off with converting web pages and mobile pages. Their prices start at around $1,500. But for the price you can see well over 90 qualified leads a month.


Why Factoring Beats a Bank Line of Credit

Factoring is not for every business. For example, if you have a bank line of credit adequate to handle your company’s operations (lets say 80% or greater of your monthly accounts receivable), then factoring probably isn’t beneficial to your business. If it is any less than that amount, your business may be suffering.

With that said, even with an adequate bank line of credit, ask yourself what happens when you begin to grow?
For Example, let’s say you are writing approximately $100k per month in sales. Let’s also assume you have a bank line of $80k. Your business runs well. But, (always a but) what happens if you grow too quickly? This month $100k, next month $140k, the following month $150k. Simply put, your bank line is inadequate. Right?

For a bank line of credit and needed additional capital, you must jump through hoops to prove to the bank you need it’s money. With factoring 80% of your receivables are available to you immediately. This month $80k, next month $112k, the following month $120k, and all on the day you invoice your client (presuming the work is done or the product delivered) wired immediately into your account.

No more waiting on payment. Bank lines of credit also come with hidden fees that factoring does not. For example if you use less than the $80k bank line of credit some banks will hit you with fees. So although the banks may have lower rates to draw you in they make their money on FEES!

The Fastest Growing Companies Are Factoring Invoices

As a business owner one of the toughest parts of your job is to make sure you have enough cash flow to pay employees and cover expenses. The technique most of us use is when we pool our capital into a separate reserve account and use the capital to pay expenses. The pool of capital gets re-filled as our customers start to pay us back.
factoring invoices for fortune 500 companies, and receivables funding

However a client may take 30 to 60 days to pay back on an invoice. Depending on how large your pool if capital is you run the risk of not having the funds on hand to pay your expenses. At the same time you cannot use the capital for other projects, or marketing needs. Many owners will not touch their reserves of capital out of fear, because they run the risk of not having the ability to pay their bills.

This leaves many business owners in a tough position, they know they need to hold on to capital in order to pay their bills, yet they also know they need some of that capital for marketing, new projects, and growth.

Let us not overlook the obvious: Just because you offer 30 day terms does not mean you always get paid within those terms. Many businesses understand that clients are late on payments. Depending on industry late invoices may be a common problem.

If you extend credit to your customers, a better strategy is Business financing. All of the major corporations use business financing to remove uncertainty from receiving invoices, and also to show cash balances on their financial statements.

The business financing method many business owners are taking advantage of is called factoring invoices. The process of factoring invoices lets your business collect the capital for your invoices within days. This gives you a solid revenue stream so you do not have to keep a pool of reserve capital. Factoring invoices also lets you extend your credit terms to your customers, and pay your bills early to take advantage of possible early discounts.

Factoring invoices is done by a financial company called a factor such as Neebo Capital. The factor give your capital for your invoices for a small fee usually less than 1.59% . The factoring company then collects the invoices from your customers. Keep in mind, not all companies function like NeeBo Capital, only Neebo waits until your invoices are paid in full before they collect their fee.

Getting down to business, we clearly see factoring invoices has its advantages. As a business owner you get a clearer picture on how your capital flows. Your management can focus more on marketing and growth rather than cash flow management. Factoring companies are all over the internet it is important to do your research to find out what works best for you. For more information on factoring invoices please visit blogs.neebocapital.com

The History of Factoring Def, How Factoring Invoices Started…

Believe it or not Factoring Invoices is older than the last 5 presidents combined! If you still can not define factoring then you are most likely a business who is not using it as leverage. Almost all fortune 500 companies’ factor invoices to better manage their cash flow.  Neebo Capital is one of the top picks for US Fortune 500 companies.

Factoring def  goes like this…

The arrival of the well-known business practice of factoring invoices began since the inception of commerce that dates back 5,000 years. The earliest recorded factoring transaction of invoices was dated sometime before the revolution in the US when cotton, animal furs, timber and other materials were shipped from the colonies to Europe’s continent.

This was a way for ship sailors to carry on the harvest in their new land,  where merchants  awaited to loan their finances to the colonists.  We also see factoring def of invoices throughout the Industrial Revolution when factoring became more focused on credit when they assisted clients in determining the creditworthiness with their customers and setting credit limits.

The method of factoring invoices has been greatly approved over the years. We now have the ability to give instant quotes to potential factorees and loan then cash for their receivables within hours. Visit Neebo Capital and get an instant quote with rates as low as .59%.


Get an Instant Factoring Quote Today!