Factoring Terminology

ADVANCE RATE: Amount of money provided immediately to the company factoring its Accounts Receivable expressed as a percentage of the total invoice amount. Advance Rates usually range from 75 to 95%.

DISCOUNT FEE: Interest rate charged to the company factoring its Accounts Receivable. Discount fees are a flat fixed percentage of the total invoice amount no matter how long the customer takes to remit payment.

FACTOR: A factor is a company that provides operating capital to businesses by purchasing their Accounts Receivable.

RESERVE OR HOLDBACK: Amount of money that is not immediately provided to the company factoring its Accounts Receivable expressed as a percentage of the total invoice amount (Advance Rate + Reserve = 100% or Total Invoice Amount). This money is transferred to your company once payment is received by the factor.

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