Actually, all of the elements are mutually exclusive.
-If the customer isn't credit worthy, factor does not approve. They will not change rate based on the credit worthiness of the customer. Sometimes they may approve part of the order, while insisting that the entire order goes thru factor's books. This way they earn the % fee on the entire amount, while guaranteeing only half. Also, no factor is going to take risk on only the less than AAA accounts and leave the Walmarts, Radio Shacks, etc. to CPQ. They want the fee on them as well.
-The fee is based on volume. CPQ ships more in one morning than we ship in a year, so they've got to be paying less than 1%.
-Just can't believe that CPQ would pay 2% over prime in today's interest rate environment.
By the way, I have never heard a company anywhere near the size of CPQ using factors. Their deal may be completely different than the traditional deal because of the size. They also probably use 3 or 4 or even more factors. They can be more flexible and play one against another, as well as getting more credit approval on accounts that have limitations. |
