![]() This can be on top of an arrangement fee. Legal documentation fees are charged by many lenders and again differ from a nominal sum to quite significant amounts. The addition of a separate arrangement fee obviously adds to this. It is important to remember that the service fee you pay is applied to the balance of your ledger when you commence so there is already a sizable fee to pay on day one. These costs can vary from lender to lender and it is important to take these into account.Īrrangement fees are charged by some lenders and are a type of fee we are seeing creep into the pricing models of more and more lenders. These costs can be significant as in many cases people will use these on a daily basis. If you are comparing costs and a lender is charging £500 a quarter for audit fees then it is important you are aware of this.ĬHAPS transfers are transfers that allow you access to your cash on the same day. If your turnover should drop dramatically and the invoice factoring company does not recover the fees they had expected then the minimum fee will kick in.Īudit fees are also charged by some lenders whereas as some other lenders include this as part of the service. A major variable in calculating the service fee that you pay is turnover. ![]() All lenders will implement a minimum service fee and this can be set as a monthly, quarterly or annually paid fee. It is important to ask what the minimum base rate is as this can have an impact on the amount of discounting fees that you pay as a client. Some lenders will also have a minimum base rate which when base rates are very low come into effect. It is important to understand how these differ and how they fluctuate. Some invoice factoring companies will quote over bank base rate while some will quote over 3 month LIBOR. These are a few of the charges that you should be asking about: The discounting fee equates to the interest rate that you would pay on an overdraft facility.īeyond these headline rates are charges that are perhaps not so obvious and can make the comparison of facilities from different lenders quite challenging. The discounting margin is the percentage above the base rate that an invoice factoring company charges for the amount that they have advanced to you. The annual service fee charged by factoring companies is therefore the percentage service fee applied to the gross turnover. The service fee is quoted as a percentage and is applied to the gross value of each invoice notified. Typically an invoice factoring company will quote two headline rates – service fee and discounting margin. Factoring rates are obviously important but so are service levels and facility structure. Please also consider what service is actually on offer and ensure it meets the needs of your business. Always consider total costs when looking at different offers. These are the 2 main fees but it is important to be aware of additional fees and charges. ![]() The margin is often dictated by their credit policies and with negotiation can often be reduced. Watch out also for the minimum base rates which a lot of lenders put in place. Some lenders use the Bank of England base rate while others use LIBOR. The total fee is made up of the base rate and the margin. This is the cost of borrowing and it should reflect the risk the company is taking. ![]() The discounting fee, what impacts on this? Turnover also has a huge impact on your service fee and typically the higher your turnover the lower the percentage service fee. This is dictated by the number of debtors you have an also the number of invoices you issue. The service fee is what the lender charges for administering your facility and it is typically determined by workload. We will have a look at what variables impact on the pricing of a factoring facility and then we will look at why some factoring companies are more expensive than others. Factoring Rates can differ dramatically from lender to lender. ![]()
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