Many times a factoring applicant informs us that “another factor has already quoted him a fee of 1%.” We will never address that in any way other than telling him that we don’t know what that means. One would think that since we are a factor, this is not a difficult concept to understand, so why the confusion on our part?
A factoring structure has many variables involved. The fee being one such variable others are; advance rate, minimum volume requirements, A/R eligibility and charge backs, person guaranty and many other items too numerous to address. The question still stands what are we confused about, can we beat the 1% fee or not! So let’s put that into context. Is the 1% fee for a 30 day period, 10 day period, or 15 day period? What does the 1% fee represent, is it a factoring fee only and the applicant will also be charged a cost of money, and a transactional processing fee on each invoice processes? Is it 1% per month on a minimum volume of $1,000,000 when the applicant actually needs only $200K in financing per month. The worst thing to do is to ask the applicant to explain the 1% fee, because in most cases, they have no clue as to what the fee represents.
Our approach at Xynergy is to present our best fee first, and not to get into bidding wars. The reality of it is that the applicant will not show you another factor’s proposal which is truly the only way to see what one is competing with. When a prospect tells us that they are shopping, we make absolutely sure that our proposal is as competitive as possible. When we open a new factoring client we have to be sure that we can make money on the transaction. Breaking even or losing money just to land a new account makes no sense.
help desk software
Recent Comments