Free tool: cost and annual rate
Factoring cost calculator
The short answer
Factoring typically costs about 1% to 5% of the invoice per 30 days, but the effective annual cost depends on how long your customer takes to pay and how the fee is billed. This calculator shows the cash you get today, total fees, the rebate you get back and the annualized cost on the money actually advanced, so you can compare any fee schedule fairly.
Results
On this invoice of $100,000, you’d receive $85,000 today and pay about $5,000 in fees, an effective annual cost of 47.7%. When your customer pays in 45 days, the factor releases the remaining $10,000.
Where each invoice dollar goes
Cash today 85% Fees 5.00% Rebate 10.0%
Versus a bank line at 10.00% APR
If you factor $100,000 every month
Annualized cost = fees ÷ funds advanced × 365 ÷ days outstanding. Monthly and one-time fees are spread by day (one-time over 12 months). Estimates only; real pricing depends on your customers’ credit, volume and the funder’s underwriting.
Want real numbers on your receivables? We route your file to funders that fit your deal.
Get matched with a funderHow is the cost of factoring calculated?
The factor advances a percentage of the invoice today, holds the rest as a reserve, and charges a discount fee until your customer pays. When payment arrives, the factor keeps its fees and releases the remaining reserve to you as a rebate.
The discount fee depends on the fee structure. A flat schedule charges a set rate per 30 days, often billed in full blocks, so day 31 can cost the same as day 60. A tiered schedule charges one rate for the first 30 days and an add-on for each extra 10 or 15 days. Prime-plus pricing charges an annual rate on the funds you actually used, plus an admin fee.
Add any one-time fees (application, due diligence, UCC filing) and recurring monthly fees (service, lockbox, ACH). The calculator spreads those by day so a single invoice and a full month of volume tell the same story. For a deeper walkthrough, read how invoice factoring rates work.
What does effective annual cost mean here?
Effective annual cost is total fees divided by the cash advanced, scaled to a year: fees ÷ funds advanced × 365 ÷ days outstanding. It answers one question: what does this money cost per year, measured the same way you would measure a loan rate?
Example: a $100,000 invoice, 80% advance, 3% per 30 days billed in 30-day blocks, paid in 45 days. You receive $80,000 today. Two blocks are charged, so fees are $6,000. That is 6% of the invoice, but $6,000 ÷ $80,000 × 365 ÷ 45 is about 60.8% annualized. Prorated daily, the same 3% rate costs $4,500, about 45.6% annualized.
The figure is a simple annual rate, not compounded, and it is an estimate for comparison. It is not a disclosed APR from any funder.
Why does the factoring rate look higher than a bank line?
Because it usually is, on a pure rate basis. A bank line priced at prime plus a few points will almost always be cheaper per dollar. The comparison bars show that gap honestly.
The trade-off is access and speed. A bank sizes a line to your balance sheet and covenants. A factor sizes funding to your invoices and your customers’ credit, so availability grows with sales. Many businesses factor because the bank said no, cut the line, or cannot move fast enough for a new contract. See factoring vs. a line of credit for the full comparison.
How can I lower what I pay?
The biggest levers are under your control or negotiable:
- Shorten days outstanding. Every extra block costs money. Offer an early-pay discount to your slowest customers, or factor only the accounts that pay reliably.
- Ask for smaller billing increments. Moving from 30-day blocks to 10-day or daily proration can cut fees meaningfully on invoices that pay just past a block line.
- Commit volume where it is real. Higher, steadier volume usually earns a lower rate. Do not sign a monthly minimum you might miss.
- Strip the add-on fees. Service, lockbox and ACH fees add up on smaller facilities. Use the proposal decoder to compare offers side by side.
Questions people ask
What is a typical factoring fee?
Factoring fees commonly run roughly 1% to 5% of the invoice value per 30 days. Where you land depends on monthly volume, your customers’ credit, average days to pay and whether the facility is recourse or non-recourse. Larger, steadier facilities with strong customers tend to price at the low end.
What advance rate should I expect?
Advance rates commonly fall between 70% and 90% of the invoice. Staffing and government receivables often sit at the higher end, while industries with more disputes or progress billing, such as some construction work, tend to be lower. The reserve is returned to you, minus fees, when the customer pays.
Is the fee charged on the full invoice or the advance?
Most factors charge the discount fee on the full face value of the invoice, not just the cash advanced. Some prime-based or ABL-style facilities charge interest only on funds in use. The calculator lets you switch between the two so you can see the difference.
Why can my rebate be negative?
If fees grow larger than the reserve, typically when a customer pays very late on a low-reserve facility, the factor deducts the shortfall from other reserves or bills you. The calculator shows this as an amount you would owe at payment. It is a signal to watch slow payers closely.
Does this calculator give me a quote?
No. It estimates costs from the terms you enter. Real pricing depends on your receivables, customer credit and each funder’s underwriting. To get actual terms, get matched with funders that fit your file.
How do I compare factoring to a merchant cash advance?
Use the MCA vs. factoring calculator. It estimates the APR of an MCA from its payment schedule and compares it with factoring the same cash need. MCAs are often far more expensive on an annualized basis and pull fixed debits from your account.
Numbers look right? Get real terms.
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