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What is Factoring?

Factoring is a term that not everyone is familiar with yet. Although it has been around for years, the Netherlands has been much more involved with it since 2015. We are happy to give meaning to factoring. Factoring is a form of financing. Your cash flow improves and you receive an immediate payment of your invoices. There is a fee in return. You 'sell' your invoices, as it were, to a factoring company, after which they immediately transfer the amount to your account. You outsource your debtor portfolio to an external company: a factoring company. They can only take over the financing of the debtor portfolio, but you can also choose to outsource your collection and debtor management to this external company. We are happy to explain to you what options there are.

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Different types of factoring

There are different types of factoring companies, each of which offers a different way of factoring. To make the right choice, it is good to know which types exist before applying for factoring. We cover four types of factoring: traditional factoring, American factoring, reverse factoring and accounts receivable financing.

Traditional factoring

Many large companies have been using traditional factoring for years. In traditional factoring you transfer your entire debtor file to a factoring company. A requirement is often that your company exists for at least 3 years. You pay factoring companies a fixed amount of your turnover or a small percentage thereof. The costs therefore depend on your turnover. Traditional factoring is also seen as another option for a bank loan . In principle, the factoring costs are not that high here. It is true that the risk lies with you, not with the external company.

Read more about Traditional Factoring

In short the advantages and disadvantages at a glance:

  • Your company has existed for at least 3 years
  • 80-90% paid out immediately (within 24 hours)
  • Long-term contract
  • Risk is yours
  • You outsource your entire debtor administration
  • Costs: small percentage (1-3%) or fixed amount of your turnover.
Read more about Traditional Factoring

American factoring

Since 2015, the alternative form of financing American factoring has been increasing in the Netherlands. With American factoring you sell your invoices individually. So it is very flexible. That is the biggest difference with traditional factoring. You choose which invoice and when you have it paid to you by the factoring company. With American factoring you do not have to deal with long-term contracts. Moreover, turnover requirements are not considered. You really choose per debtor whether you resell the invoice. You do, however, fully relinquish the risk to the factoring company. The costs of American factoring are not fixed, but are often between 3 and 6 percent of the invoice amount. You will receive 100 percent of your invoice immediately. This factoring is particularly interesting for freelancers and SMEs .

Read more about American Factoring

In short the advantages and disadvantages at a glance:

  • Flexible
  • 100% paid immediately (within 24 hours)
  • No long-term contracts
  • No turnover requirement
  • Risk is not yours
  • You choose per debtor and invoice which you outsource
  • Costs: between 3 and 6 percent of the total invoice amount
  • Particularly interesting for freelancers and SMEs
Read more about American Factoring
  • For all companies: large or small
  • Response within one working day
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Reverse factoring

In contrast to traditional factoring, reverse factoring looks at the customer. The debtor (your customer) initiates this financing solution. In this way, the customer gets longer to pay the invoice and you have more certainty that the invoices are paid. This only concerns really approved invoices to prevent non-payment. The costs are lower with reverse factoring, because there are only approved invoices. The costs lie with the supplier and are between 2 and 4 percent. Nor does the risk lie with you, but with the factoring company.

Read more about Reverse Factoring

In short the advantages and disadvantages at a glance:

  • 100% paid out immediately, minus a small fee
  • The creditworthiness of the debtor is considered
  • Non-payment is prevented by approved invoices
  • Risk is not yours
  • Your customer receives more working capital, his invoices are pre-financed
  • Suitable for SMEs
Read more about Reverse Factoring

Accounts receivable financing

In addition to the three options mentioned above, there is also such a thing as debtor financing . These organizations finance the outstanding invoices of your customers. They will pay you part of the outstanding amount. The difference with factoring is that you maintain contact with the debtor yourself. Debtor financing is offered in two ways: as factoring and as overdraft . You will also receive a credit limit on your business account . The amount thereof is determined by the previous annual figures (including the amount of debtors). You can not only contact factoring companies for debtor financing, but also your bank.

Read more about debtor financing

In short the advantages and disadvantages at a glance:

  • You keep in touch with your customer (the debtor)
  • Current account: You will be given a credit limit on your business account
  • You can also contact your bank
Read more about debtor financing
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What our users say about business money .nl

From now on you no longer have to waste time and energy on debtor administration. You can outsource this in whole or in part. With factoring you avoid financial problems, because some factoring companies bear the risk for you (especially American factoring). You also insure this against bankruptcy of the debtor. This way you do not have any risk yourself. However, this is not the case with every factoring company. Outstanding invoices are paid directly and directly to you. You no longer have to deal with invoices that are paid late or not. Collection agencies only pay when the invoice has been paid, which is different for factoring companies: they pay within 24 hours. You can immediately continue with your company: time to invest and let your company grow further. What are you waiting for? Compare via our website which factoring company suits you well. This way you can see at a glance the benefits of factoring companies. Compare them here now.

  • What are the factoring costs?

    There is quite a difference in the costs when you consider the various factoring options. If you opt for traditional factoring, factoring companies look at your turnover. You pay a fixed amount or a percentage of your turnover to the factoring company. With American factoring, the costs are often between 3 and 6 percent of the invoice amount to be received. The fees are therefore higher than with traditional factoring, also because it is so flexible and society bears the risk. With reverse factoring, the costs are for the customer and not for you.

    If you choose the option debtor financing - overdraft credit - then you are stuck with a variable interest rate. This can rise, but also fall. Your monthly costs may therefore differ monthly. With factoring you are tied to a percentage or fixed amount of your turnover.

    Depending on the factoring company, additional costs may also occur. Some factoring companies charge an application fee. Or the factoring company will open a separate account for you. These costs are also often for your account. When factoring companies perform a creditworthy check, in some cases they pass the costs on to you. So check this carefully before you register with a company.

  • Request factoring: how does this process work?

    Which factoring is most suitable for you differs per person and company. It is important to first look at the different types of factoring and which factoring suits you and your company. View the different options and compare them with each other. Request quotes from various organizations, so that you can make the right choice. Ask for an overview of all costs involved. Also read the conditions of the factoring companies carefully. What obligations do you have to meet and are additional costs involved?

    Once you have made your choice, it is time to see how the factoring request is going. In most cases you can register online and often start the next day. You will often hear on the same day whether you qualify. Most factoring companies offer the option to submit the invoice via an app or portal. They will take care of the rest. Nowadays there is an option to keep up to date with the invoice status. In most cases, you will be paid 85 to 100 percent within 24 hours, depending on which factoring you have chosen.

    The process

    You have delivered a service or product to a company. You make an invoice about this. You submit this invoice to the factoring company. Factoring companies check the invoice and verify it with the debtor. They want to prevent inaccuracies and fraud, so questions are asked to the debtor:

    • Has the invoice arrived?
    • Has the customer received the delivered products / services satisfactorily?
    • Does the debtor agree to pay the invoice through the factoring company?

    Factoring companies 'buy' your invoice so that they can collect it from the customer. Because they take over this service from you, you usually pay a percentage on the invoice total or on your turnover. The factoring company then immediately pays you 80, 90 or 100 percent of the full invoice (the percentage depends on the type of factoring). You have been paid and can then invest again. The factoring company is waiting for payment from the customer. Depending on the factoring chosen by you, you will receive a residual amount minus the agreed percentage.

  • What are the benefits of Factoring?

    There are certainly some advantages to factoring. We would like to list them for you.

    • With factoring, for example, you have more flexibility in your available resources.
    • By means of factoring you have more access to capital than through bank financing on debtors. Factoring companies usually pay more than 70 percent directly to you; banks pay around 50 percent.
    • Many factoring companies make the invoice amount available within 24 hours. You will therefore receive the amount to be paid by the customer fairly quickly.
    • In most cases of factoring, you don't have to go after it yourself.
    • In particular, the creditworthiness of the debtor is considered. That's where factoring companies collect the money.
    • Depending on the type of factoring, the risk lies with the factoring company.
    • It will save you time if you outsource the accounts receivable administration.
  • What are the Disadvantages of Factoring?

    However, there are also disadvantages to factoring. We give you a brief overview.

    • There are costs associated with factoring. This is often 3 to 6 percent of your bill (American factoring) or a fixed part of your turnover (traditional factoring).
    • The maximum credit that can be obtained is limited, as it is directly related to your invoices or sales.
    • With traditional factoring you bear the risk yourself. That is annoying if debtors do not pay on time.
    • Not all of your invoices are eligible. Be well informed in advance.
    • In the event of your customer's bankruptcy, you may have to pay back the amount received to the factoring company.
    • Factoring companies can refuse customers if they run a high risk.

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