Factoring Cost

Treggons1 wrote: »

Hi, We have been Factoring our invoices for 8 years and always need to draw down our money down as a chaps payment. If I send money to a supplier on a chaps payment (nearly instantly) my bank as far as I know does not charge or if they do it its minimal. But the Factoring company charges £25.00 for each transaction. Is this something all factoring companies charge or is it something I should look into ?

Who do you bank with?

Most banks charge between £20 and £30 for a CHAPS payment.
Are you sure you are paying by CHAPS, as opposed to Faster Payment?

Nowadays, CHAPS payments are usually only used where the amount exceeds the daily limit that your banks applies to Faster Payments (although even then, some people will avoid CHAPS and simply spread the payment over more than one day, each day maxing out their limit)

As the factoring company is possibly paying out vast amounts of money in total every day to their numerous clients, then Faster Payments is presumably not a viable payment system, hence they use CHAPS.

To be clear, this is not something a factoring company charges, but rather their bank charges. If the factoring company simply passes on this charge to you as a disbursement, then you will pay the amount the bank charges. If the factoring company applies this as a charge (as opposed to a disbursement), then they would also add VAT to the amount (assuming they are VAT registered)