Factoring service fees
- Discount charges (bank interest) offered – Typical charges range from 1.5 per cent over base rate to 3 per cent over base rate. The discount charge is usually applied monthly.
- Service or management fees
- Any additional costs – e.g. for additional services such as credit insurance/protection – Typical charges range from 0.5 per cent of turnover to 2 per cent of turnover.
- Notice period for ending the service – a typical notice period is 3 months, but some providers have notice periods of up to a year which could be expensive for your business
It must be noted that for invoice discounting, fees are typically lower than for factoring because one collects and manages debts yourself. They generally range from 0.2 per cent to 0.5 per cent of turnover. These fees are less because the level of service provided is significantly lower than with factoring.