5 Foundations of Factoring Costs

This is the percentage of the invoice amount that is advanced upfront to the client: typically around 80-85%. Avoid any bad surprises and make sure you clearly understand how the money to be funded upfront is calculated.

A chargeback occurs when a factor (ie. Liquid Capital) has funded an invoice and it is later determined that part or all of the invoice amount is in error and will not be remitted before a predetermined period (or at all). This could result from defective products being delivered, aging invoices or disputes. The factor then charges this amount back to the client.

This is expressed as a percentage of the invoice amount and represents the amount the factor keeps as a fee. The use of this term varies. Liquid Capital always quotes one rate and there are never any hidden fees. In addition, we only charge a 30-day rate on the first 30 days your invoices are outstanding and a daily rate afterward.

This is the amount, expressed as a percentage of the invoice amount, that a factor holds as a reserve until the invoice is paid. The factor pays the reserve amount, less their fees, when the invoice is collected. It is essential in managing your cash flow that you know exactly when reserves are paid out. Liquid Capital releases reserves at least once a week so you always have timely access to your cash.

With “traditional” or “full” factoring, all of a customer’s invoices are factored on a continuous basis. Spot factoring is the factoring of an invoice or group of invoices on a one-time basis.