When calculating the costs that a client business has to pay for factoring services, one must take note that rates differ from one factoring company to another. Researching and getting a quote from different factoring companies will help the business choose the factor that is most favourable, in terms of quality of service and affordability of rates.

However, although rate offers vary, there is one thing in common to those that offer asset based factoring services-factors adjust and base their rates according to the creditworthiness of the client's customers. Although factors also look at the client's profile, this is not the primary basis.

From this, one can see the advantage of asset based factoring over securing a loan from the bank- banks are very particular with the client business itself, while factoring is concerned with the client company's circumstances and the level of creditworthiness of its customers or debtors.

Primarily any factor looks for 3 things when considering whether it should take on that new client.

1. Creditworthiness of customers

2. Spread of risk of those customers. By this we mean that even though a particular customer may be strong, like Walmart for instance, the factor may refuse to factor those invoices if they are the ONLY invoices available. The reason is that if Walmart does not pay, the factor will have insufficient protection form the 20% reserve being held back. And Walmart may not pay because the goods may have been delivered late or incorrectly packed.

3. All customers should be company customers (not individual consumers) paying as show on invoices up to a maximum of 60 days with 90 days actual maximum payment times.

Other ways to determine the costs include the kind of pricing that the factor company will employ with regard to the factoring fee or discount rate. This may either be flat-rate pricing, where the factoring fee or discount rate will be fixed regardless of the length of time that invoices are outstanding; block-time pricing, where rates are proportional to set block periods; and the pricing that is proportional to each day of outstanding invoice. Still, faster collection of accounts receivables generally reduces the factoring fee or the discount rate.

The annual sales volume and invoice size will also affect the rate. This means that for few invoices that have yield large amounts, the factor offers better terms. Although having several invoices factored may lead to discounts, if the annual sales are small for each of these, then these may also be relatively more expensive than the earlier case. This is because more invoices to be factored means that the factoring company will exhaust more resources and provide more services.

There are other ways of determining overall fees, including the service/set-up fees, historical dilution rate and the length of relationship established between the client and its factoring company. All in all, it is best to know the particular processes, privileges, and pricing methods of each prospective factor, and then compare.