Traditional Factoring vs Hybrid Factoring
Cost | |
Typically higher rates | Simplified lower rates |
Additional APR | No additional APR |
Majority of invoices funded are 60 days and under | Majority of invoices funded are 120 days and under |
Additional fees (wire fees) | No additional fees |
Rates marked up to cover borrowing costs | No need for markups to cover borrowing |
Flexibility | |
Long-term fixed contracts | No long-term contracts |
Client concentration not allowed | Client concentration allowed |
Termination penalty applied for early termination of contract as well as insufficient acccount participation | No termination penalty |
Customer Interaction | |
Factoring company collects invoices from business customers | Business maintains collections responsibility, while payments are processed by the bank |
Customers notified of financing program | Borrower’s customers unaware of financing arrangement |
Financing company owns billing & stamps as their own | Business owns billing & modifies remittance address to that of bank |
Quarterly financials are audited | No quarterly audits |
Weekly funding | Daily funding |