The most common thing we get asked is “what’s your price”? So we thought it would be helpful to provide some thoughts into how we price our deals. The reason is twofold. First it’s just way simpler to send someone to a well written post. One that answers all their questions instead of sending them to an FAQ page. Second is that it will help you wrap your head around what a deal would look like with OAREX. We should not that there because we are a factor (i.e. a funder), many assume we charge interest. That’s not the case. Here is info about the fee we charge, and the few factors that go into the amount we charge.
Interest / APR vs. Factoring Fee
As a factoring company we do not charge interest. That’s because we don’t make loans. Instead we will buy your invoices from you right off of your balance sheet. So if you are owed money by a demand partner, we will buy that invoice off of you. We will wait to get paid instead of you waiting to get paid. For this we charge what’s called a “discount” or “factor” fee. This is a discount right off the top of the invoice value itself. So if we charge a 2% factoring fee, you will get 98% for that invoice ($0.98 for every $1.00). Interest however is a fee on the money itself. So if a lender loans $100,000, and charges 2%, the interest is $2,000. Here are the main differences between interest and a factoring fee:
- Interest is charged on the money. A factor fee is discounted from the top of the invoice amount.
- Interest accumulates on interest. A factor fee is fixed per time period.
- Interest is charged on a monthly basis. Our factor fee is charged in 10-day buckets.
- Our price is more expensive than a loan, but worth every penny. Here’s why we are superior for digital media receivables financing
The 3 Factors That Effect Our Price
The three factors that affect our price are credit quality, concentration and volume.
1. Credit Quality. Since we are not a lender, we do not care about your credit. One more time – we do not care about your credit. Instead we care about your customers’ credit. Can they pay their bills in 60 days? 90 days? Are they cash flow positive? Where are they based? Are they a global institution, or a 3-man company in a shared office center? We have a 32 pronged-test we do for each ad network / agency. You can find our first hand payment and credit data in our free digital media payments report. We release the report each quarter.
2. Concentration. Are all of your eggs in one basket? Do you generate most of your revenue from one or two demand partners? That poses a risk because if one of them doesn’t pay, you go out of business. You will get a better price by selling more invoices because it’s less risk for us. That calls for a better price, and we pass those savings on to you.
3. Volume. If you’re selling us $50K worth of invoices a month, it will be more expensive than if you’re selling us $500K or $5M. Simple enough.
OAREX is a risk-free solution for digital media and ad tech firms. Here are 5 ways we can help you “de-risk” your digital media cash flow.