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What are the rates for factoring?

At first glance factoring rates are high. But in comparison to the rates you're paying at the bank, which you have to pay continuously, it's not a situation where you have an invoice and it's out for 30 days and you pay for the 30 days and then that's it. That doesn't happen with banks. That doesn't happen with standard factorers. Also, you get penalized, not only at the bank, but at the factoring line.

If you overdraft on the line, if you are not funding the right amount of money, that kind of thing can hurt you. Spot factors don't have any of that. Also, they have no upfront fees, and they don't ask for any sort of commitment. So you are really paying for the time you use. Again, with larger invoices, the spot factor will work with their clients, and figure out a rate that works for them so that their margins and the factoring rate don't interfere with each other.

Some clients are concerned that sometimes the process can be a little cumbersome if they have a lot of smaller invoices that go out continuously to their customers. Having them sign the notification is hard. Some spot factors have special processes for special industries like that.

For example, transportation, where you have a lot of small $200, $300, $500 invoices that go to the same customer and lead up to a bit of a larger amount, where they might need funding. Spot factors have a different process for that to simplify the paperwork.

Spot factors will work with the small business to fit the process to the client's needs, rather than having them come and fit into the factor’s needs. That's what banks and standard factorers will do.

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