The Hidden Fees in Invoice Factoring Contracts You Need to Know About

Why Hidden Fees Matter

A factoring company quotes you a 2% fee per 30 days. On $100,000/month in factoring volume, that's $2,000/month in fees—about $24,000/year. Sounds reasonable.

But add $25 wire fees per funding (4 fundings/month = $100), a $350/month minimum fee waiver, a $500 application fee amortized over 12 months, and an ACH fee on the reserve release—and your effective monthly cost is $2,600+. That's a 30% overstatement of the quoted rate.

Hidden fees are legal and disclosed in the contract—but they're often buried in schedules and annexes rather than the main agreement. Knowing what to look for protects you.

The Most Common Additional Fees

Wire transfer fees ($15–$35 per transfer): Charged every time the factor wires you money. If you factor invoices daily, this compounds quickly. Ask if ACH (usually free or $5) is available instead.

ACH fees ($0–$10 per transfer): Often free, but some factors charge for ACH as well. Clarify which payment methods are free.

Monthly minimum fees: If your monthly factoring volume falls below a threshold, you owe a minimum fee regardless. Amounts vary widely—$200 to $2,000+ per month.

Application or setup fees ($0–$500): One-time charge to process your application and set up the account. Many factors waive these for competitive reasons.

Due diligence fees ($0–$1,500): Charged for credit investigation on your customers. Typically one-time per customer, not per invoice.

Field audit fees ($0–$2,500): Some factors conduct periodic audits of your receivables. These may or may not be charged back to you.

Invoice processing fees ($0–$10/invoice): A flat fee per invoice submitted, regardless of amount. Matters a lot if you have many small invoices.

Reserve management fees: Rare but worth asking about—fees for holding your reserve balance.

Termination or early exit fees: If you close your account before the contract term ends—typically 1%–3% of the contracted credit line.

The Due Diligence Checklist

Before signing, request and review these documents:

1. Complete fee schedule or schedule of charges — a table of every potential charge

2. Form factoring agreement — the actual contract, not just the proposal

3. Notice of assignment form — the form your customers will receive

4. Lock box / remittance instructions — where your customers will send payment

Then ask these specific questions:

- 'What is the wire fee? Is ACH available for free?'

- 'What triggers the monthly minimum? What is the exact minimum fee amount?'

- 'What is the early termination fee and after how many days does it expire?'

- 'Do you charge for customer credit reviews on additional customers?'

- 'Are there any fees not listed on this fee schedule?'

The last question is particularly important. A trustworthy factor will answer clearly. Evasion is a red flag.