- Choose Carefully
- Read the Fine Print
- Know your Fees
Not All Factoring Companies Are The Same
Have you shopped around? If so, you might have noticed that most factoring fees are all about the same, but lately, there have been more factoring companies that advertise factoring fees that seem too good to be true. When you find such companies, do you convince yourself that you are a great shopper or do you say something doesn’t seem right?
There are a handful of less than honorable factoring companies out there, just like in any other industry. When you ask a shady factoring company the BIG question… What is your rate? You might be surprised that it’s as low as 1%, especially since most other factoring companies or more than double this. We can understand why you would be inclined to jump at this but is it really true? No, of course, it’s not true (sorry to say). Factoring companies that tell give a rate that is too good to be true, never tell you about all of their fees; sure they answered your question on what the rate is but perhaps your question should have been… What are all of the costs to factor an invoice or a follow-up question…Are there any additional fees that you will be charged? These companies that offer you a rate that is too good to be true, will have so many junk and hidden fees that it would send you running for the hills if knew about them upfront. The problem is companies like this never disclose all of their fees.
So what are the additional fees?
On top of a factoring fee you will have to pay an APR on your used credit line. Many of our competitors are charging a double fee (factoring fee and APR).
You will be charged you a $2.00 invoice review fee on every invoice.
Their 1% fee is only if you sell them 100K per month in invoices, if not the fee is much higher.
They also charge you a minimum amount fee if the invoice amount is not at a certain number.
You will pay the APR and the factoring fee (whichever is higher).
You will be charged a monthly maintenance fee.
They even charge you a funding fee.
You will pay a fee to access your online portal.
These are just a few.
Their 1% factoring fee on a $100 invoice can cost you over 10%. They will never tell you this upfront because they know you will go with another company. This type of factoring company would normally approve you for a 100K credit line and then charge you a 10% fee to terminate the agreement. They try to lowball their fees to get you to sign their agreement then make the termination fee so high that you have no choice but to stay when you find out what the true cost is.
There are factoring companies that are out there that only exist to charge you termination fees.
Be aware of any factoring company that sends you a 15-page agreement, as this is normally 15 pages of hidden fees.
Be aware of any factoring company that has more than a one-year agreement.
One last thing, be very aware of a factoring company that makes you sign a proposal. There is a hidden language that they hope you do not see we do not understand that will allow them to file an all asset lien on your company before they even send you their contract to review. If you sign their proposal and do not like the terms of their agreement, they will charge you thousands of dollars to terminate the UCC that they shouldn’t have filed on your company to start out with.
Read the Fine Print Before you Sign
Alliance One LLC like all other factoring companies has an agreement. Some agreements are for one year (as is ours) and other can go out five year. Our agreement is five pages long, with the fifth page being the signing page only. Most of our competitors agreements are 15 pages long. Our agreement is straight forward and easy to read our competitors agreements are loaded with junk fees and legal mumbo jumbo. They hope to discourage you by not reading too deep into their agreement. The deeper you go the more you will find loads of hidden fees and a hidden APR.