Invoice Factoring Calculator
The true cost of factoring an invoice: cash advanced, the discount fee by 30-day period or flat, rebate, cost as a percentage of the invoice, annualised APR, the late-payment scenario, annual cost at your volume and a comparison with early-payment discounts and a bank line.
| Cash advanced now | — |
|---|---|
| Factoring fee for the period | — |
| Rebate when the customer pays | — |
| Total you receive | — |
| Effective cost as % of invoice | — |
| Annualised cost (APR on the advance) | — |
| If the customer pays 30 days late | — |
| Annual cost at your volume | — |
| Compared with a 2/10 net 30 early-payment discount | — |
In short
Invoice factoring advances 80–90% of an invoice immediately and charges a discount fee of roughly 1–5% per 30 days until the customer pays; a 2%-per-30-days fee on a 45-day invoice costs 4% of face value, which is close to 40% annualised on the cash actually advanced. Non-recourse factoring costs more but shifts customer credit risk to the factor; compare with a bank line of credit or early-payment discounts.
Who this is for: US B2B businesses with slow-paying customers comparing factoring offers.
What invoice factoring really costs
- Mechanics: advance rate (typically 80–90%) × invoice paid now; the factor collects the invoice and releases the reserve less the discount fee.
- Fees: 1–3% per 30 days is common for creditworthy customers; "flat" 2–5% deals are cheaper for slow payers, per-period deals are cheaper for fast payers. A 2% per-30-days fee on a 45-day invoice is 4% of face value — about 38% annualised on the cash advanced.
- Recourse vs non-recourse: non-recourse factoring costs 0.5–2 points more but protects you if the customer goes bust (not if they dispute the invoice).
- Alternatives: a bank line of credit (prime + 1–4%), early-payment discounts, or invoice financing (borrowing against receivables you still collect yourself).
- When it works: fast growth with long customer terms, government or large-company customers with slow but reliable payment, and businesses that cannot yet get bank credit.
See also: Merchant Cash Advance Calculator, Business Loan Calculator.
Assumptions
- Fee = rate × invoice × number of (full or partial) periods outstanding, or flat; plus other fees.
- Annualised cost = fee ÷ cash advanced × 365 ÷ days outstanding.
- Comparison: 2% early-payment discount; bank line at 11% on the advance for the same days.
Worked example
Advance $42,500 now. The 45 days span two 30-day periods, so the fee is 2 × 2% × $50,000 = $2,000 + $50 = $2,050 (4.10% of the invoice). Rebate $5,450 on collection; you receive $47,950 in total. Annualised on the $42,500 advanced over 45 days that is about 39%. If the customer pays 30 days late the fee becomes $3,050 (6.10%, ~35% annualised over 75 days). Over a year, $24,600 on $600,000 of invoices; a 2% prompt-payment discount would cost $1,000 per invoice instead.
Frequently asked questions
How much does invoice factoring cost?
Typically 1–5% of the invoice per 30 days, depending on volume, customer credit and recourse terms — often 25–60% annualised on the cash advanced.
What is the difference between recourse and non-recourse factoring?
With recourse you buy back invoices the customer does not pay; non-recourse shifts the customer credit risk to the factor for a higher fee.
Does factoring affect my credit?
It is not a loan, so it does not add debt to your balance sheet; your customers will know, as they pay the factor directly.
Is invoice factoring tax-deductible?
Yes — factoring fees are an ordinary business expense.
Will my customers know I am factoring?
Yes for traditional factoring (they pay the factor); confidential invoice financing keeps collections in your name at a higher cost.
What is a factoring reserve?
The 10–20% of the invoice the factor holds back until the customer pays, released minus fees.
Related calculators
See all United States calculators → · All free online calculators
Found an error? Report it — tell us the inputs, the result you got, what you expected and the rule or source. Confirmed corrections are published within a week.
Ready to build your next digital solution?
Send the brief and you get a scoped response with approach, milestones and a fixed price range. Not a sales call.
A 30-minute call with the engineer who would run your project
Within 2 business daysA written scope: approach, module breakdown, milestones, fixed price range
Within 5 business daysYou decide. No retainer, no obligation, and the scope document is yours to keep either way
Your timelineSend your brief
Three fields to start. Add project details if you have them.