APR vs Discount Fee’s

Every now and then we get a business owner looking for the difference between APR (Annualized PERCENTAGE RATES) and Factoring Discount fees.
APR vs Discount Fee’s
As an analyst these questions can still confuse me. Business owners juggle many different financial tasks and terms. However there is a huge difference between factoring discount fees and annualized percentage rates.

The difference is complicated:

– Annualized percentage rates are dependent on a businesses risk over the year.

-Factoring discounts fee’s lower the risk to net 90 terms at the most.

*keep in mind if you try and compare an annualized rate with a short term rate(factoring discount fee), you must ALSO compare a company that can qualify for a long term loan and one that cannot. Those two companies are not the same, neither is the cost of funds.

Above is the definition, and as you can see trying to compare the two is like saying ducks and eagles are the same because they both fly. I say this because if you attempt to multiple a 30-day invoice fee by 12 you will not get a accurate number of the annualized percentage rate.

For example: When a factoring company funds your  30-day invoice with net 90-day terms, your invoice will be repaid between 25-45 days on average. This means the risk of the outstanding invoice is only over a short period of time.

This short term reflects the risk your company brings into the equation. Factoring companies accept this risk and offer a factoring discount fee.

On the other hand a bank will make a loan that they expect will be paid over a year or more, because they make calculations whether or not your business will be better over a period of time. If banks see any risks that your business cannot pay back the loan, the you get no loan!

Factoring companies will give your business funds within 24 hours to 3 days. Their lending is dependent on the creditworthiness of your customers.

Hope this helped
Chirs L.

Oil & gas Providers Factoring

This blog is written for businesses working in the oil and gas industry:
Oil & gas Providers Factoring
We all know how well the gas and oil industry has been performing. For many people, it’s been a spark of hope to push the economy forward. States that have oil sources (e.x. Pennsylvania, Ohio, Colorado), have seen an expansion in oil related industry growth and oil affiliated jobs. Most of all, this has lead to a significant increase in the amount of small businesses who provide for the oil and gas industry.

Many of these start-ups where created by individuals who have a lot of technical know how but usually not a lot of money. They start getting new business and their customers start growing. Many these start-ups in the oil and gas industry get into trouble once they realize that their company has weekly expenses however , Oil and Gas clients pay their invoices in 45 to 60 days. Sooner or later, they experience trouble paying expenses while they wait for slow paying customers to pay their bills. And that’s exactly where the factoring companies step in.

Quite a few factoring finance companies have noticed this and have started to finance oil field service businesses as an new extension of their existing factoring businesses. This area is become a powerful financing area and is going more mainstream. This makes the industry has strong customers and shows growth.

If your business is in the oil and gas industry and is in need of funding, give us a call 1-888-382-3766 or visit us online by clicking here

Factoring VS Bank Loans

Just about the most common statement I hear individuals make is that factoring is far more expensive than a loan from the bank. This comparison is like comparing apples & oranges but most business owners still believe it. The reason is because factoring is a financial tool that few business owners fully understand.

banking vs factoring

First, lets make it clear that when a company can qualify for sufficient financing from a traditional bank and that is the very best financial option for the business then factoring need not to be considered.

However if a company is unable to obtain adequate financing from a bank then factoring may be a better option for small businesses.

first- Factoring is not debt financing, you don’t receive money like you will from a traditional bank. A factoring company actually purchases the invoice from your business, therefore the invoice is an asset you’re selling. These invoices must be purchased at a discount so it should not be compared to an interest rate from a line of credit.

2nd- Turnaround time for authorization for funding from your traditional bank is often longer than 2 months with alot of unnecessary pain and paperwork. Your banker has to get approvals and the underwriting team has many hurdles for you to jump over in order to get funded. With factoring you can get an account and get funded in as fast as a week and then on future invoices you can receive funding in 24 hours. Plus if you acquire additional customers the factoring company will fund you for them in 24 hours.

third- A traditional bank generally needs to see a minimum of 2 years of financial for your business as well as requires you to have collateral together with your invoices EVEN a personal guarantee. On the other hand, A factoring company can provide funding to start-up companies so long as their customers are creditworthy and all that is required is the accounts receivable and many factoring companies don’t demand a personal guarantee.

fourth- A factoring company in addition offers even more services. As opposed to a traditional bank, a factoring company constantly monitors your accounts receivable and collections. They offer credit screening for potential new clients for your company and they provide up to date aging reports to help you in getting a better handle on your receivables aging. A factoring company is also constantly advancing new funds as well as collecting outstanding invoices and your credit facility continues to grow with your new accounts.

To sum it up the big issue is not if factoring is more costly than a bank loan, because it is obvious that the two cannot be compared. As a business owner you should consider advantages of factoring vs. a bank loan.

With factoring you never be worried about out-growing your credit line or quickly spend your loan and get into debt with the bank. With factoring you can get additional capital easily when needed so your credit line grows as your business grows.

Plus if you are unable to meet orders due to insufficient working capital, then factoring offers you the cash-flow needed to complete the order. If you find your business in this situation give us a call 1-888-382-3766 or visit us online by clicking here.

Factoring Websites Claim Unreal 1% rates?

 A quick online search shows that you will find a number of factoring companies that offer what appears to be very cheap factoring rates. Based upon what you search online, you will find claims saying you can factor your invoices for only 1%. Sometimes, the rates are even lower. How can this be? And in some advertised websites, the rates appear to be cheaper than traditional bank financing.
cheap factoring rates
Just how can factoring be cheaper compared to a conventional business loan that’s only reserved for prime customers with plenty of assets?

Let us explain this for you:

The key is to recognize how nearly all factoring rates work. Even though the rates might seem to be cheaper than bank financing, often they will not be.


Well first we need to evaluate how factoring fees are commonly evaluated. Factoring company’s commonly charge you a fee that will increase the longer that a invoice remains un-paid. This is sensible, the more time an invoice goes unpaid = the greater the cost.

Below are 2 popular techniques for determining factoring fees:

1. Ten Day Fee: This is certainly the most popular factoring fee structure. In this case, the factoring company prices a fee for a 10-day period. For instance, 1.00% for every 10 days the invoice remains unpaid, this fee adds up until the customers pay the invoice in full. The fee for the first 10 days is 1.00%. The fee for the second ten days is 2.00% and etc.

2. Daily fee: This is the most basic factoring fee model you are charged a daily fee for each day that the invoice is unpaid by the customer. An example of this would be a 0.30% fee per day. This equals about 1.00% for ten days and about 3.00% for every 30 days the invoice remains unpaid.

These illustrations have got one thing in common = the cost of factoring a invoice for ten days is 1.00%. Using this information, you could say factoring is provided at rates “as low as 1%” Definitely, just make sure your invoice are paid very quickly and in ten days or less.

in the event that you are evaluating factoring proposals, you should contemplate looking at the fee structure carefully to recognize what the total cost of factoring is going to be for you. The best way to find out – check with your factoring company for the cost of factoring invoices for thirty or sixty days. That will provide you with a good measure of the actual factoring fee cost.

If your business is experiencing cash flow issues and is in need of funding, give us a call 1-888-382-3766 or visit us online by clicking here

Invoice Finance

Click here to get a Instant quote

[youtube http://www.youtube.com/watch?v=VNHTJtXlHMU&fs=1&rel=0&feature=player_embedded&hl=en]

To Get A Fast Quote for your Businesses Cash flow Needs
Click Here
One of our certified specialists will assist you. We offer credit lines starting at $5K up to $50 Million.

Purchase Order Finance and Accounts Receivable Financing

Have you ever considered Purchase Order Financing or Accounts Receivable Financing , also known as factoring invoices?

In contrast to Purchase Order Financing, Accounts Receivable Financing focuses on advancing a large portion of the invoice immediately after the product is delivered to the customer. Instead of waiting Net 30 to up to net 90 days to get paid, an accounts receivable financing company is able to reduce the wait to virtually net zero by advancing 70-90 percent of the invoice amount. After the full payment has been received from the customer the accounts receivable financing company will transfer the remaining portion of the invoice, minus their cost (typically one to three percent).


Get you Cash Fast!  As compared to the drawn out process of traditional financing, both Purchase Order Financing and Accounts Receivable Financing can be obtained in a matter of days, albeit Accounts Receivable financing can be faster than purchase order financing.

Credit Worthiness. Both methods focus on the credit worthiness of your client, not your balance sheet. Traditional lending look to your past history of managing your company’s finances and credit when deciding if a line of credit will be approved. Purchase Order Financing and Accounts Receivable Financing, on the other hand, will look to the future of your company and the creditworthiness of your clients.

These two funding strategies are  great for newer companies. Companies without a track record of at least 2-4 years,  you may  not have much of a shot at getting approved for business credit through a traditional lender. Since purchase order financing and accounts receivable financing companies put more weight on your clients creditworthiness, than on yours, young businesses are able to get the financing they need! Visit NeeBo Capital Today!