Hi John,
I have trouble understanding the concept of interest when it comes to calculating net cost or benefit of factoring.
For example when there is information that the factor would make an advance of 70% of receivables and that the interest on the advance are 3% higher that company is paying of overdraft, what does it really mean? I don't know why it is included as cost when calculating if factoring is acceptable.
Thank you in advance! ;)
Regards,
Sylwia
Ask the Tutor ACCA FM
Interest on advance - factoring
8y ago#1If the factor gives advance, they are effectively lending money to the company.
It might take the factor (for example) 1 month to collect receivables, but they may agree to give some of the money immediately to the company - they are lending money to the company and will therefore charge the company interest,
Thank you very much. It's clear now! :)
8y ago#3You are welcome :-)
Topic lockedNew replies are closed.