Invoice Factoring and Trade Finance Costs

 In Invoice Factoring, Invoice Finance, Purchase Order Finance, Trade & Inventory Finance

The most common types of questions we are asked revolve around cost.

How much does a facility with you cost? What are the rates? What are the fees? Are you the same as a bank? Are you less than a bank?

Keep reading because I will get to the pricing shortly.

The thing is with Debtor Finance or Purchase Order Finance there is no set rate card.

What we offer is specialised and tailored indvidually to each business and their needs.

So when we say we don’t know, that is the reality, we don’t know.

Not until we receive an application and look into the nitty gritty of your business.

So we may not be able to tell you the costs straight up but we can tell you how the pricing is structured

But before we launch into a pricing tirade… you first need to ask yourself a few key questions:

How much is a facility worth to you? (I don’t mean this in a used car salesman like way)

Do you have a business case to present to us (or more importantly to yourself) that will make us want to finance you?

What problems is the finance going to able to solve for you? And how much money is it worth throwing at the problem to get it solved?

Or equally as important;

What result do you want?

As a small business you really should be able to boil it down to dollars and cents.

Let’s go on with the questions:

How much profit are you going to make once a facility is in place?

Think to yourself, what kind of investment am I going to make to get these results? – If you invest $1, what do you want to make on it? Is it $5, $10 or $100?

“You dont know your value, until you know your result”  says Daniel Dunsford, director at AR Cash Flow.

So lets talk pricing structure…

In order to keep our pricing low, we need longer relationships with our clients so we can spread our costs over a longer period.

This is  better as it works out to be a lower cost per transaction for you the client.

A 12 month relationship is where we like to start.

From there, rates are dictated by numerous factors including:

1.  Spread of customers

2.  Risk of goods

3.  Paperwork

4.  State of your company (business history)

5. Proven orders going forward

Apart from these factors and of course the results you want, the main thing we look at is your profit margin. Does it justify you wanting to work with us or us wanting to work with you?

A lot of people complain the banks and financiers aren’t lending money but the real question is why do they want to lend you money? Are you a sound investment?

If you can’t justify that you’re going to get some good results from the facility, why would a financier lend to you?

Before you begin pondering and agonising over costs, ask yourself this important question – What are you going to get out of it? If you can show you will get stellar results and are excited, then we will be too.

 If you would like more information on Trade or Debtor Finance, call the office n 1300 552 158 to book in an appointment with a Product Specialist.


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