Invoice Factoring Calculator
Calculate invoice factoring costs, advance amounts, and effective APR. Understand the true cost of factoring your invoices for immediate cash flow.
Calculator
Invoice Details
Typically 70-95% of invoice value
Typically 1-5% per 30 days
Average days for your customers to pay
Factoring Breakdown
How it works: You receive the advance amount immediately. When your customer pays, the factor releases the reserve minus their fee.
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Understanding Invoice Factoring
Invoice factoring converts your outstanding invoices into immediate cash. Instead of waiting 30, 60, or 90 days for customers to pay, you can access funds within 24-48 hours. This calculator helps you understand the true cost.
How Invoice Factoring Works
You provide the factoring company with your invoice and customer information for approval.
Within 24-48 hours, you receive the advance amount—typically 80-90% of the invoice value.
The factoring company collects payment directly from your customer when the invoice is due.
Once your customer pays, you receive the remaining reserve amount minus the factoring fee.
Typical Factoring Terms
Factoring vs. Other Options
- Fast access to cash (24-48 hours)
- Based on customer credit, not yours
- No debt on balance sheet
- Outsourced collections
- Scales with your sales
- Higher cost than traditional loans
- Customer relationship changes
- May require minimums
- Long-term contracts possible
- Not all industries qualify
Industries That Use Factoring
- Trucking & Transportation - Long payment cycles from brokers
- Staffing Agencies - Weekly payroll with 30-60 day terms
- Manufacturing - Large orders with extended payment terms
- Wholesale/Distribution - High-volume, low-margin businesses
- Construction - Progress billing and retention holdbacks
Cost Tip: Calculate the annualized percentage rate (APR) to compare factoring costs with other financing. A 3% fee for 30 days equals about 36% APR—compare this to your other options.
Frequently Asked Questions
What is invoice factoring?
Invoice factoring is when you sell your unpaid invoices to a factoring company for immediate cash. They advance you 70-95% of the invoice value immediately, then collect payment from your customer. Once paid, they release the reserve minus their fee.
How much do factoring companies charge?
Factoring fees typically range from 1-5% per 30 days. Rates depend on your industry, customer creditworthiness, invoice volume, and payment terms. High-volume businesses with creditworthy customers get better rates.
What's the difference between advance rate and factoring fee?
The advance rate (typically 70-95%) is the percentage you receive upfront. The factoring fee (1-5%) is the cost charged for the service. The remaining amount (reserve) is released after your customer pays, minus the fee.
Is invoice factoring expensive compared to other financing?
When annualized, factoring fees can equal 15-60% APR, which is higher than traditional loans. However, factoring is easier to qualify for, provides faster access to cash, and doesn't create debt on your balance sheet.
Who qualifies for invoice factoring?
Factoring is based on your customers' creditworthiness, not yours. B2B businesses with reliable customers typically qualify. Minimum requirements vary but often include $10,000+ monthly invoices and 30-90 day payment terms.
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