10 Reasons Why You Shouldn't Factor Your Receivables

Any small business has heard about a factoring company. They are very cookie cutter, expensive, and have a small window to fit in if you want financing. The problem with this is that if you do fit into that small window of doom, a factoring company will charge you a ton of sneaky fees, and rob companies of their profit.

Since here at Lenders Commercial Finance, we are not a factor, we are an asset-based lender; we will be discussing the benefits of using a company that likes to think out of the box when it comes to financing companies.

1. Advance Rates - that is the big part of the equation, as a small business, how much money will we get out of financing our receivables? Our rates on advance vary from 75%-90% of the invoice, as compared to 70%-85% that a factor will give. That means more bang for your buck!

2. Rate Periods - 
Factor - 5 Day, 10 Day, 15 Day, 30 Day Chunking
LCF - Convenient Daily Rate, No Chunking

3. Rates Applied To - 
Factor - Full Invoice Amount (Regardless of Advance Rate)
LCF - The Net Amount Advanced

4. Typical Rates - 
Factor - 2%-4% every 30 days
LCF - 0.069% to 0.089% for each day

5. Float Days - 
Factor - 3 to 5
LCF  - 1 or 2

6. Required Reserves -
Factor - Typically 10%
LCF - No Reserve Requirements

7. Factor All Your Accounts -
Factor - Usually Required
LCF - Not Required

8. Factor All Accounts with Single Debtor
Factor - Usually Required
LCF - Not Required

9. Factor When Confirmed with Debtor
Factor - Usually Required
LCF - Can Hold Your Invoices Up to 15 Days Before Due Date

10. Repurchase Your Invoices Early
Factor - Not Allowed
LCF - Allowed Anytime


There are the first 10 ladies and gentlemen!

As you stew over that pretty little list, I will start working on the next 10.

In the meanwhile...