Factoring with No Minimum Fees
Some factoring facilities can prove to be expensive and restrictive due to the monthly or annual minimum fees that they impose. If your turnover is unpredictable, seasonal or you don’t require finance on a continuing basis minimum fees can be off putting. The good news is that there are factoring facilities available without such fee structures. In the fist instance contact us on 0845 251 4040.
Why do lenders charge minimum fees?
Lenders typically charge minimum fees for two main reasons:
- There is a certain amount of cost involved in setting up a factoring facility. These costs are associated with their staff visiting you, going through the credit process, undertaking a pre lend survey and also setting up the facility prior to making the fist payment. There is also the cost incurred of managing your facility on a monthly basis. By implementing monthly minimum fees the factoring company ensures that their costs are recovered over the course of the facility.
- Many factoring companies price a facility based on projected turnover and typically the higher the turnover the lower the percentage fee. If a business was to finance a high turnover and then only achieve 10% of that prediction the factoring company would typically run the facility at a loss. As such minimum fees are implemented to ensure that those costs are covered even if forecasts are way off target.
Unfortunately, minimum fees only work in favour of the factoring company so it is imperative that they are structured properly to ensure a cost effective solution for your business. If they are not structured properly your cost of borrowing can balloon unnecessarily. Speak to us today to ensure you get the best possible deal for your business.
So what are your options?
- You may decide that you just wish to factor certain invoices rather than all your invoices in which case a selective factoring or spot factoring facility might be suitable. This means that you simply factor the invoices or debtors you would like to as and when you require finance and no minimum fees are applied.
- There are factoring companies that will set up facilities with bundled fees whereby a certain fee is applicable on each invoice. There are no additional fees and no minimum fees. This type of facility can be great for small businesses, new start businesses or where turnover is seasonal.
- Negotiate annual minimum fees rather than monthly minimum fees. If your business is seasonal or has busy months and quiet months an annual minimum may prevent high costs in months where little or no turnover goes through your account.
How can Funding Solutions help?
At Funding Solutions we understand the whole market of factoring companies and their facilities. By working with you to understand both your business and it’s requirement we can ensure we can offer the best possible factoring advice to you and your business. If you feel that minimum fees are not suitable for your business contact us on 0845 251 4040 to explore your options.