Free tool · Switching factors
Factor buyout estimator
The short answer
A factor buyout payoff is usually your outstanding advances plus accrued fees, plus any early-termination fee and minimum-volume shortfall charges. The new funder wires that amount and your reserve typically comes back or gets netted. This estimator totals the payoff, the true cost to switch, and whether waiting for your renewal window beats paying the exit fee.
Your new funder would typically wire about $430,500 to your current factor: $400,000 in advances, $8,000 in accrued fees, a $22,500 early-exit fee and about $0 in shortfall fees through the notice period. If the old factor nets your $90,000 reserve on the payoff letter, the actual wire drops to about $340,500.
- Enter your contract renewal date to see the last day to send notice, your no-penalty exit date, and whether waiting beats paying the fee.
- Your notice window for the next renewal has passed, so the contract will likely renew. The next no-penalty exit is if notice goes out by .
- To leave without the termination fee, written notice must reach your factor by . Send it certified, exactly as the agreement specifies.
- Waiting looks cheaper. Leaving early costs about ; riding it out to costs about in shortfall fees and forgone savings. That is roughly saved by timing the switch to the renewal window, if your cash position can wait.
- Paying to leave early looks cheaper than waiting until : about now versus by waiting.
Earliest exit if you pay the fee: , after the notice period runs. Many agreements require notice even for early termination.
Typical switch timeline
Typical ranges from kickoff. A clean file often closes in about 14 days; slower files take 38 or more.
- Request the payoff letter starts day 0, done around day 3 to 7Ask your current factor in writing for a payoff letter good through a specific date, listing advances, fees, any early-exit charge and the reserve.
- New funder diligence starts day 0, done around day 7 to 21Application, AR aging, customer verifications, UCC and lien searches, and a draft buyout or tri-party agreement. Runs alongside the payoff request.
- Buyout and assignment from day 7, done around day 9 to 24The new funder wires the payoff, the old factor assigns the purchased invoices, and the new facility starts advancing.
- UCC-3 termination from day 9, done around day 12 to 34The old factor files a UCC-3 to terminate (or assign) its financing statement. Get the filing commitment in the payoff letter.
- Notice of reassignment to customers from day 9, done around day 14 to 38Customers receive signed letters from both factors redirecting payment to the new remit-to address. Expect a few stray payments to the old lockbox for a cycle.
Estimates only. Your payoff letter controls the real numbers, and terms vary by agreement and funder.
What goes into a factor buyout payoff?
The payoff is what your current factor needs to release its lien and assign your open invoices. It almost always includes the advances still outstanding and the fees accrued on them through the payoff date. On top of that, your agreement may add an early-termination fee, minimum-volume shortfall charges and small items such as wire or UCC filing fees.
Your reserve works the other way. It is money held back from invoices your customers have not paid, and it belongs to you. Many factors net it against the payoff, so the wire the new funder sends is smaller than the gross number. Others release it as the old invoices collect. Ask which method yours uses before you plan cash around it.
- Owed no matter what: advances outstanding and accrued fees.
- Owed only because you are leaving early: termination fee and shortfall fees through the notice period.
- Comes back to you: the reserve, either netted on the payoff letter or paid out as invoices collect.
When is waiting for the renewal date cheaper than paying the termination fee?
Waiting is cheaper when the fees you keep paying until renewal add up to less than the termination fee. A 3% fee on a $750K line is $22,500. If you are paying $1,500 a month in shortfall fees and renewal is four months away, waiting costs about $6,000. That math flips when renewal is a year out, or when the new funder’s pricing saves you real money every month.
The catch is the notice window. Most agreements auto-renew unless you give written notice 30 to 90 days before the term ends. Miss it by a day and you may be locked in for another year, which makes the termination fee the only way out. The estimator shows the last day to send notice and flags when the window has already closed.
How long does it take to switch factoring companies?
A clean buyout typically takes two to four weeks from kickoff. Requesting the payoff letter and the new funder’s diligence run in parallel. Diligence is usually the long pole: AR aging, customer verifications, lien searches and the buyout agreement. Once the payoff is wired, the old factor files a UCC-3 and both factors sign notices redirecting customer payments.
Delays usually come from the old factor slow-walking the payoff letter, a stale AR aging, or customers that keep paying the old lockbox. Read our factor buyout guide and the switching factors playbook for the paperwork in detail.
How should I read these results?
Treat the output as a planning estimate, not a quote. The payoff letter from your current factor controls the real number, and it is usually good only through a specific date. Fees accrue daily, so a payoff dated two weeks out will be higher than one dated tomorrow.
Net cost to switch counts only what you would not owe if you stayed. Advances and accrued fees are owed either way. If the new funder’s pricing is better, add the monthly savings field to see how fast the switch pays for itself. To compare the pricing itself, run both agreements through the proposal decoder.
Questions people ask
Does the new factor pay off my old factor directly?
Yes. In a typical buyout the new funder wires the payoff straight to your current factor under a buyout or tri-party agreement. In exchange, the old factor assigns the open invoices and releases its lien. You do not need to raise the cash yourself.
Can I get out of a factoring contract early?
Usually yes, by paying the early-termination fee in your agreement and giving the required written notice. Some agreements step the fee down over time or waive it if the factor breaches. Read the termination section carefully and send notice exactly as it specifies.
What happens to my reserve when I switch factors?
The reserve is your money. Your current factor either nets it against the payoff, which reduces the wire, or pays it out as the purchased invoices collect. Confirm which method applies and get it written into the payoff letter.
What is a UCC-3 termination and why does it matter?
A UCC-3 is the filing that ends or amends a lender’s UCC-1 financing statement. Until your old factor terminates or assigns its filing, it still appears to have a claim on your receivables. Your new funder will require the filing commitment in the payoff letter.
Will my customers know I changed factors?
In a notification facility, yes. Customers receive signed letters from both factors redirecting payment to the new remit-to address. Most update their records within a billing cycle, and the factors forward any stray payments.
What if my notice window already passed?
Your contract may auto-renew for another term, often 12 months. You can still leave by paying the termination fee, or send notice now for the next renewal. Some factors will negotiate the fee down rather than keep an unhappy client, so it is worth asking.
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