- 18 Mar
Service Charge 67% Of Overall Recourse Factoring Fees
After recently reviewing the result of our confidential invoice discounting (CID) pricing research, I looked back at our recourse factoring pricing study, which completed about a year previously.
Recourse Factoring Pricing
The results were similar in that they showed a wide range of pricing differentials between the top and bottom ends of the market, in fact the range was a staggering 165% between the cheapest and most expensive quote received for an average sized client.
Service Charge Accounts For 67% Of Overall Fees
Looking below the headline differences I calculated the proportion of the overall charges, that the service charge element represented. These calculations excluded any additional fees such as for a CHAPs transfer etc.
On average the service charge, within these recourse factoring quotes, accounted for 67% of the overall charges. This is somewhat more than the equivalent percentage when examining confidential invoice discounting quotes (59% of total cost was admin fee). This is perhaps what one might expect to see. There is a larger service element to providing factoring, as a credit control service is included. Therefore, logic would suggest that the "service fee" element might be expected to make up more of the overall costs.
With CID, the admin fee (equivalent of service charge) is attributed to the administration and risk management of the facility. It could be argued that 59% of overall fees being attributed to this is quite a high proportion. The range of admin fee elements within our CID study was between 49% and 66%. There would be some logic in considering using the providers that quoted at the bottom end of this pricing spectrum. Within their charges, a proportionately lower percentage of what you pay is attributed to the administration and risk management functions.
Range Of Prices - Recourse Factoring
We also looked at the proportion of the overall fees made up of service charge, across the range of prices that we received within the recourse factoring comparison. We found that the range was from 57% up to 77% of overall fees. This suggests that when comparing factoring prices, the key element is the service fee, but the discount margin should not be ignored, as it could still account for a third of the overall price that you pay (on average), and up to 43% of your overall costs, should you select the provider that attributed the lowest proportion of their fees to discount charges.
- 03 Apr
The Cheapest Invoice Finance Company
If you are looking for the cheapest invoice finance company, you may be surprised to know that there is no single company that answers this description.The cost of an invoice finance facility depends upon a number of factors, and the cheapest provider for any particular circumstances varies according to those circumstances.We have undertaken extensive research into the pricing of invoice finance...
- 29 Mar
Is Invoice Finance Expensive?
Is invoice finance expensive?The answer to the question is that it doesn’t have to be. However, if you choose the wrong provider, you could end up paying more than you need to.Our research has shown that overall pricing for, as an example, a factoring facility can vary by 165% from the cheapest quote to the most expensive. We also saw an 86% differential between the top and bottom of the...
- 14 Mar
Why You Should Not Just Compare Invoice Discounting Pricing Percentages
So often we speak to customers that are comparing various offers for invoice discounting, and their key measure for comparison is the headline administration (often wrongly referred to as service charge) charge percentage.With an offer for invoice finance, you normally are quoted a service fee (or administration fee for invoice discounting), a discount charge (similar to interest) and then there...
- 02 Feb
41% Cost Saving On Invoice Finance
You may be forgiven for thinking that any existing users of invoice finance will have moved providers, and will be benefiting from the lowest prices that are on the market, but that is clearly not the case. This was highlighted in the case of a prospect that we assisted over the last few weeks.They spoke to us regarding an existing invoice financing facility, that was being provided by a bank...
- 29 Jan
Service Charge & Discount Charge Differences Between Invoice Discounting Companies
I recently reported the 86% differential between the cheapest and most expensive quotes that we received for a particular client situation. This difference was based on a comparison of the anticipated charges that might be levied by different invoice discounting companies.I thought it might be interesting to look in a bit more depth at the components of those costings, and how they vary between...
- 24 Jan
Invoice Discounting Minimum Monthly Fees Charges Compared
I was asked to clarify if minimum annual fees are still charged monthly, and how many providers offer a flat fee structure (as opposed to charging a percentage of turnover). The answer is that most providers have moved away from quoting a minimum annual fee, towards quoting minimum monthly fees. The effect is the same, but I guess the number presented to a prospective client seems much smaller...
- 23 Jan
41% Cost Saving On Recourse Factoring
One of the things that we pride ourselves on is keeping up to date with pricing around the factoring market, so that we can find the best rates for our clients.In a recent example we were able to find a c. 41% projected cost saving for a prospect, on the fees that they were already paying - this equates to a substantial annual cost saving for the company.This particular example involved a company...