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.
The Fundamentals of Factoring Costs
Some business owners might consider invoice factoring expensive, but that’s only because they’re unclear about the true operating costs involved with running a business. Economics textbooks talk about opportunity cost, and nobody knows more about opportunity cost than small business owners.
Think about all the time you invest in performing due diligence on your customers by processing their invoices and collecting your accounts receivable. Now imagine if you could outsource those tasks to a full-service provider – and spend more time growing your business. Funding with Liquid Capital relieves you of having to pay burdensome administrative costs while simultaneously reducing bad debt losses. With Liquid Capital, the cost of funding really does pay for itself.
Pricing practices vary widely among different AR financing firms. A discount rate is usually quoted at an initial amount, and then another higher rate is applied for subsequent time periods. When reviewing AR financing firms, it is important that you identify all the fees that will be charged. Sometimes, the discount rate represents a funding rate, and then there is also an additional servicing fee that is not explained up front. You will save money (and aggravation) if you make sure to look at all the fees and calculate the true cost before you commit to any arrangement. At Liquid Capital, we are industry pioneers with our one-quote pricing mechanism and upfront fee schedule with no hidden charges.
Learn more about The Liquid Capital Difference.
In order to get a true picture of your financing options, it is important to understand the 5 keys of factoring in finance:
Learn more about Liquid Capital’s Invoice Factoring Solution.