FINANCIAL BUSINESS RECEIVABLES (FACTORING) - contin.

Then, you borrow money from the factor to produce your Store Y order of $60,000. This order will cost you $30,000 to produce (your variable costs), plus $2,000 (at the high end) for the financing, but no fixed costs since those were already covered by the first order. Your company's net profit will be $28,000. In other words, by taking this "expensive" financing, you made an extra $28,000!! Do you see that this financing is not expensive at all if you use it correctly? Consider this: VISA and Master Card are factors - they advance money to retailers worldwide, charging them 2.5% (?) commission, then collect from the consumers. Have the card companies increased retailers' volume? Without a doubt, yes! So, why doesn't everyone jump in and do this? Well, that's a good question.