Fairview Commercial Lending FAQs
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- What is factoring (definition, etc..)?
For receivables factoring, the invoices are assigned to the factor and they charge a fee of ~2-4% for 30 days. If for example, a small business sold a widget for $100, they billed the customer, the factor would come in and give the small business $96 today for the invoice. When the customer that bought the widget pays the invoice in 30 days, the factor receives the entire $100. Inventory can also be factored. In the case of inventory factoring, a factor will make a loan to a small business with their inventory as collateral. Rates are typically very high for inventory factoring and the loan is typically <30% of the market value of the inventory.
