Precisely correct ... and concisely explained!
Company A uses a factor that charges 4.67% and the arrangment is for $30,000 for one month.
Compnay B borrows $30,000 from a bank at the annualized rate of 8%, but for only one month.
Company A's cost to do the factoring arrangement for one month would be $1,401.
Company B's cost to do the bank loan for one month would be only $200.
Therefore your wonderful Factoring arrangement is costing the company about 7 times more than what a decent company would pay a bank for borrowing the same amount for a month.
thanks for playing.
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