How invoice factoring is priced
A factor advances a percentage of each invoice right away, commonly 80% to 90%, and holds the rest as a reserve. When your customer pays, the factor deducts its fee and remits the balance of the reserve to you. The factoring fee is often quoted as a percentage of the invoice for each 30 days, with 1% to 5% per 30 days cited as a typical range, so the longer a customer takes to pay, the more it costs.
Other charges can add to the headline fee: set-up or due-diligence fees, ACH or wire fees on each transfer, monthly minimum volumes and early-termination penalties. This calculator lets you add a processing fee as a percentage, a fixed fee per invoice and one-off fees.
Worked example: $40,000 of invoices paid in 45 days
Factor four invoices worth $40,000 at an 80% advance. You receive $32,000.00 now and the factor holds $8,000.00 as a reserve. The factor charges 2.5% of the invoice for each 30 days or part of 30 days, and your customer pays in 45 days, which is two periods. The fee is $2,000.00, so the total cost is $2,000.00. That is 5.00% of the invoice amount, 6.25% of the advance and $500.00 per invoice.
The factor remits $6,000.00 of the reserve and you end with $38,000.00 from the invoices. Over 45 days the cost works out at an APR of 50.69%, which is the cost divided by the advance, times 365 divided by 45. The same invoices would cost $1,000.00 if your customer paid in 30 days and $3,000.00 if it took 90 days.
Check a published example
Corpay's guide to factoring uses a $10,000 invoice with an 85% advance and a 2.5% fee for 30 days. The advance is $8,500.00, the reserve is $1,500.00, the fee is $250.00 and the reserve remitted to you is $1,250.00, so you receive $9,750.00 in total. This calculator gives the same figures. It puts the APR at 35.78% on the $8,500.00 advance, which is $250.00 divided by $8,500.00 times 365 divided by 30. The guide describes this as roughly 30%, so treat that rounder figure with care.
Factor fee, yearly rate or one-off fee
Choose how your factor charges. A fee per period applies to the invoice amount for every period started, such as 1% for every 10 days. A yearly rate is applied to the advance for the days it is outstanding. A one-off fee is a single percentage of the invoice amount.
On $75,000 of invoices across five invoices at a 90% advance, an 18% yearly rate on the advance for 60 days and a 0.5% processing fee, the factoring interest is $1,997.26 and the processing fee is $375.00. The total cost is $2,372.26 and the APR is 21.38%. On $20,000 across two invoices at 85%, with 1% for every 10 days, 28 days (three periods), a $25 fee per invoice and $300 set-up costs, the total cost is $950.00 and the APR is 72.85%.
When the fees are larger than the reserve
A very high advance rate leaves a small reserve. On $25,000 at a 95% advance with 4% for every 15 days and a 60-day payment, the fee is four periods, or $4,000.00, but the reserve is only $1,250.00. You would owe the factor $2,750.00, and the calculator shows that amount as charges above the reserve.
What this estimate leaves out
This is a planning estimate for one set of invoices paid on one date. It does not model a volume contract with monthly minimums, tiered fees that rise each week, recourse or non-recourse terms, chargebacks, invoices paid at different times or a customer who never pays. Factors can calculate days and fees differently, so the figures in your agreement are the ones that count.
To compare factoring with a short-term loan, use the working capital loan calculator.
For an advance repaid from card sales, use the merchant cash advance calculator.
Use the right country page
This page stays in US dollars and uses US terms: invoice factoring, factoring fee and APR as the nominal annualised rate. The country choices above the inputs open separate local pages. Choosing United Kingdom opens the invoice loan calculator, which uses invoice finance terms, a discount charge and service fee, and shows the APR as the effective annual rate. The inputs reset and amounts are not converted.
Inputs for the invoice factoring loan calculator
How the factor charges
A fee per period on the invoice, a yearly rate on the advance, or a one-off fee on the invoice.
Invoice amount and number of invoices
The total face value you factor and how many invoices make it up, used for the cost per invoice.
Advance rate
The share of the invoice paid to you straight away. The rest is held as the reserve.
Days until your customer pays
How long the advance is outstanding, from 7 to 365 days.
Factor fee or rate
The rate in your quote, read as the pricing choice says: per period, per year or one-off.
Fee period
The days in each fee period, used only when the fee is charged per period. Any part of a period counts.
Processing fee and other fees
A percentage of the invoice amount, a fixed fee per invoice and any one-off set-up fees.
CALCULATOR QUESTIONS
US invoice factoring loan calculator questions
How do you calculate the cost of invoice factoring?
Multiply the invoice amount by the fee rate for each period started, then add any other fees. 2.5% of $40,000 for two 30-day periods is $2,000.00.
What is the advance rate in factoring?
It is the share of the invoice you receive up front. At 80% on $40,000 you get $32,000.00 and $8,000.00 is held as a reserve.
What happens to the reserve?
When your customer pays, the factor deducts its fee from the reserve and remits the rest. In the worked example $6,000.00 of the $8,000.00 reserve comes back to you.
How do you work out the APR of a factoring fee?
Divide the total cost by the advance and multiply by 365 divided by the days outstanding. $2,000.00 on a $32,000.00 advance over 45 days is 50.69%.
Does it cost more if my customer pays late?
Usually yes. A fee per period is charged again for each period started, so $1,000.00 for payment in 30 days becomes $3,000.00 at 90 days in the example.
What happens if I change country?
The United Kingdom option opens the separate invoice loan calculator, in pounds, with a discount charge and service fee and an effective annual APR. Your inputs are reset rather than converted.