In addition to any initial set up and audit cost, the ongoing costs of debtor based finance will include two main elements:

•    A service charge, which for factoring typically runs from 0.5% to 1% of turnover, to as high as 3%.

Factoring tends to be more expensive than invoice discounting as the charges include the cost of providing the credit control service. You need however to be clear as to what is included in this cost as some funders have expensive additional charges for services such as TTs.

•    Interest costs, which will be quoted at a rate over base and which should therefore be directly comparable with interest rates on other types of lending.