How to Compare Factoring Quotes Side by Side

Why do two quotes at the same rate cost different amounts?

A factoring quote is a bundle of terms wearing a single number. The discount rate on the cover page tells you the price of one 30-day period of financing, and nothing at all about how many periods you will be charged, what happens on the days in between, or what sits outside the rate entirely. Change only the increment rule — daily proration against full 30-day blocks — and the same 1.5% resolves to 2.1% or 3% of face value on the same invoice, paid by the same customer, on the same day.

Then come the charges that never appear as a percentage: a monthly minimum that bills you for volume you did not use, a wire fee on every funding event, a lockbox maintenance charge, a filing and due diligence fee at onboarding, an aging surcharge once an invoice passes a threshold, and a termination clause that prices your exit. None of these are hidden in any sinister sense — they sit in the fee schedule — but they are quoted in dollars while the rate is quoted in percent, and the two never get added together unless you do it yourself.

What has to be on the table before you can compare anything?

You cannot normalize a quote you have only half received. Before any comparison, ask every funder on your shortlist for the same written package, in the same format, and treat a refusal as information. A term sheet that lists one percentage and a signature line is incomplete, not simple. The goal is to reduce each offer to a set of numbers you can put in one spreadsheet without guessing at the gaps.

Ask for it as a written exhibit rather than a verbal summary on a call. Sales conversations compress detail, and the detail is where the price lives. If a funder cannot produce the complete schedule before you sign, you are being asked to agree to terms you have not read, which is a decision in itself.

• The discount rate and, explicitly, the increment it is charged in — daily, 10-day, 15-day or full 30-day periods
• The advance rate, and whether it is uniform or varies by customer, invoice age or industry
• The complete fee schedule in dollars: application, due diligence, UCC filing and search, wire, ACH, lockbox, account maintenance, portal access
• The monthly minimum, expressed both as volume and as dollars of fees, and what happens in a month you miss it
• The aging policy: the day a surcharge starts, the rate it adds, and the day an unpaid invoice is charged back to you
• Whether the facility is recourse or non-recourse, and precisely what the non-recourse protection responds to
• Term length, the auto-renewal mechanism, the notice window and the early termination charge
• Whether you must finance the whole ledger, named customers only, or can select invoice by invoice
• A redacted sample settlement report showing one real invoice from advance through reserve release
• Who services the account day to day, and who your customers will actually speak to

How do you normalize the rate basis?

Start with your own aging report, not with the terms printed on your invoices. Net 30 is an instruction; day 42 is a fact. Pull the last six to twelve months of settled invoices, calculate the weighted average days from invoice date to cash received, and use that one number for every quote you are comparing. If your ledger splits cleanly — say a group of large buyers settling in 35 days and a long tail at 60 — run the comparison twice rather than averaging two different behaviors into a single misleading figure.

Then apply each funder's own increment rule to that number. Daily proration divides the 30-day rate by thirty and multiplies by actual days outstanding. A 15-day increment rounds up to the next half period. A full 30-day increment charges a complete period the moment an invoice crosses into day 31, which means day 31 and day 60 cost exactly the same. Only after this step are the two percentages describing the same thing, and only then is it meaningful to say that one of them is lower.

What does the side-by-side actually look like?

The table below takes two offers that would both be presented as 1.5% and restates them on one basis: a business financing $250,000 of invoices a month, roughly 25 fundings, with customers paying on day 42. Every line resolves to dollars, because dollars are the only unit the two quotes genuinely share. The percentages at the bottom are derived from the dollars, not the other way around.

How much difference does the fee basis really make?

Worked line by line, the gap between those two offers is not a rounding difference or a negotiating margin — it is larger than the entire discount fee on several months of volume. Most of it comes from one sentence in the fee exhibit about how days are counted, and the rest comes from charges that were never expressed as a rate at all.

How should you value a higher advance rate?

Advance rate and discount rate answer different questions, and collapsing them into one judgment is the most common comparison error. The advance rate decides how much of the invoice reaches you on day one; the discount rate decides what the financing costs. Our AR programs advance 80% to 95% of invoice value, factoring up to 95%, and freight programs up to 97% of the load — and within those bands a few points of advance is a cash timing question rather than a pricing question. The reserve is not a fee. It comes back to you when your customer pays, less the discount fee and any adjustments.

So price the gap explicitly. Five points of advance on $250,000 a month is $12,500 of cash you wait for rather than lose. If that cash would fund payroll on a contract you would otherwise decline, it is worth paying for. If it would sit in your operating account, it is worth very little, and you should take the cheaper fee structure instead. The one profile where advance rate deserves real weight is a business whose growth is hard-capped by working capital, where every extra point converts into revenue it can presently prove it is turning away.

What else belongs in the comparison besides price?

Once the dollars sit on one basis, the remaining differences are operational, and they are not trivial. A facility that is two-tenths of a point cheaper but funds in three days instead of one, or that routes your customers to a call center treating them as delinquent debtors, can cost you more in commercial goodwill than it saves in fees. These factors resist being put in a spreadsheet, which is exactly why they get dropped from comparisons that should have included them.

• Funding speed on a normal day and on a day when a document is missing, stated as a cutoff time in your own time zone
• How invoices are verified — email confirmation, portal acknowledgment or a phone call to your customer, and how that call is scripted
• Whether notification is disclosed to your customers, and the exact wording of the notice of assignment
• Credit limits per customer: how they are set, how fast they can be raised, and who approves an exception
• Dilution handling: how credit memos, short-pays and returns are reconciled against invoices already funded
• Concentration tolerance, if one customer is a large share of your ledger
• Reporting: whether you get a live portal, how settlements are presented, and whether the data exports cleanly into your accounting system
• Who answers when something goes wrong — a named account manager, or a queue

How do you run the final decision?

Work through the quotes in a fixed order so each stage is settled before the next begins. Mixing price, structure and service judgments together is how businesses talk themselves into the offer that was presented best rather than the one that is best.

1. 1Fix your own inputs first. Write down expected monthly volume, number of fundings a month, weighted average days-to-pay and your seasonal low month. Use the same four numbers for every quote so no funder gets scored against a friendlier assumption.
2. 2Restate each discount rate at your days-to-pay. Apply each funder's increment rule to your average and convert the result to a percentage of face value. This single step usually reorders the shortlist.
3. 3Annualize every fixed charge. Twelve months of minimums, lockbox and maintenance, plus per-funding transfers times your funding count, plus one-time onboarding costs. Add them to the discount fees to get one total dollar figure per offer.
4. 4Stress the minimum against your slow quarter. Divide the monthly fee minimum by your effective fee percentage to find the volume at which it starts costing you money, then check that figure against your worst month last year.
5. 5Price both exits. Calculate the cost of terminating in month six and at first renewal, including notice periods and any percentage-of-facility charge. A facility you cannot leave is a facility with no competitive pressure on its pricing.
6. 6Separate the cash question from the cost question. Note the advance rate difference in dollars of working capital, decide what that cash is worth in your business, and only then set it against the cost gap you calculated.
7. 7Score the operational terms on a fixed list. Use the same checklist for every funder — funding cutoff, verification method, credit limit process, named contact. Judging from memory after the calls simply favors whoever called last.
8. 8Read the agreement, not the proposal. Ask for the actual contract and fee exhibit before you decide. Where the two documents disagree, the agreement governs, and the gap between them is worth knowing about while you still have leverage.