Factoring cost calculator
See what a factored invoice really costs: the cash you get today, what's held in reserve, the fee, and the effective APR to compare against a loan or line of credit.
Your results
- Cash today (advance)
- $9,000.00
- Reserve held back
- $1,000.00
- Total cost (factoring fee)
- $600.00 (6% of invoice)
- Rebate when your customer pays
- $400.00
- Effective APR
- 54.1%
Fee periods charged: 2.
How the math works
- Cash today = invoice × advance rate.
- Reserve = invoice − cash today.
- Fee = invoice × fee rate × number of fee periods (one period for a flat fee).
- Rebate = reserve − fee, paid to you after your customer pays the factor.
- Effective APR = fee ÷ cash today × 365 ÷ days outstanding. This is simple interest on the money you actually received, which is the fair way to compare factoring with a loan or line of credit.
Fees are charged on the full invoice, but you only receive the advance, and you pay for every period the invoice is open. That's why short fee percentages turn into large annual rates. Contracts may add other charges — application, wire/ACH, credit-check, minimum-volume or termination fees — that this calculator doesn't include. See the fees that don't show up in the rate and how to read a factoring contract.
Frequently asked questions
What is the effective APR of factoring?
It's the factoring fee expressed as a yearly rate on the cash you actually received: fee ÷ advance × 365 ÷ days outstanding. Because the fee is charged on the full invoice but you only get the advance, and because invoices are outstanding for weeks rather than a year, a 3% fee can work out to an effective APR of 30% to 60% or more.
Why does the number of days matter so much?
Most factors charge per period the invoice stays unpaid — often per 30 days, sometimes per 10 or 15 days, or prorated daily. If your customer pays on day 31 under a per-30-day schedule, you pay for two full periods. Check how your agreement counts days before comparing quotes.
What is the reserve and when do I get it back?
The reserve is the part of the invoice the factor holds back (invoice minus advance). When your customer pays in full, the factor subtracts its fees from the reserve and sends you the rest, called the rebate. If fees exceed the reserve, you owe the difference.
Is a flat fee cheaper than a per-30-day fee?
It depends on how fast your customers pay. A flat fee costs the same whether they pay in 10 days or 60, so it favors slow payers. A per-period fee is cheaper when customers pay quickly. Run both through the calculator with your real days-to-pay.