Questions about invoice factoring

There is no single rate. The fee is set by the provider and depends on the arrangement, the invoices, the customers and the collection work involved. Ask each provider for its fee in writing, with an example on one of your invoices.

Providers calculate differently. Some apply a discount to the invoice value, others charge according to the number of days the money is outstanding, and some charge separately for verification or for ending an agreement early.

The agreement sets out what happens. A late payment can affect the fee, the reserve release, or in a recourse arrangement, place the invoice back with you. Ask what is expected at 30, 60 and 90 days past due.

Often there is for a whole-ledger arrangement, and sometimes not for a selective one. Ask about the term, the notice required to leave, and any charge for exiting early.

Businesses that invoice other businesses or public bodies for completed work. Providers apply their own criteria, and they will look at your customers, your paperwork and your trading history.

Some providers work with newer companies where the customers are strong and the invoices are clean. Others want a trading record. There is no single answer, so ask each provider what it requires.

Invoices for completed, undisputed work owed by a business or public sector customer. Invoices that are disputed, partly delivered or already pledged to another lender are normally excluded.

Some providers buy them. Public sector invoices usually need a purchase order reference and confirmation that the work was received before they can be processed.

Under a notification arrangement, yes, and they will be asked to pay the provider. Under a non-notification arrangement they continue to pay you. You should know which applies before the first invoice is sold.

It is an arrangement where your customer is told the invoice has been assigned and is asked to pay the provider directly. The provider then handles reminders and follow up on overdue amounts.

That depends on the recourse terms. Under recourse you may be required to buy the invoice back. Under non-recourse the provider carries more of the loss, within conditions that usually exclude disputes and require notice within a set period.

To some extent. You still raise invoices, keep the paperwork and deal with disputes. What the arrangement removes is the wait for payment and, under notification, most of the collection follow up.

Ask about recourse, notification, minimum invoice size or volume, contract length, termination charges, how the fee is calculated, and when the reserve is released. Ask for the answers in writing.

Requirements differ between providers and between provinces, and some arrangements fall under business finance rules while others do not. Ask a provider about its licensing, its complaints process and which regulator applies to it.

It is a public registration of a security interest, made in the provincial personal property security registry where provincial law provides for one. In Quebec the equivalent is a registration in the RDPRM. It sets the provider's priority against other creditors.

The agreement sets the notice required and any exit charge. Invoices sold before the end still run their course, and the security registration should be discharged afterwards. Confirm the discharge timing in writing.