Invoice Factoring Calculator

Determine the effective APR and immediate cash value of factoring your invoices.

Invoice Details

$
%

Percentage of invoice paid upfront.

%

Total fee deducted from the invoice.

30 Days

How long until your customer pays the invoice?

Note: Most factors also hold a "Reserve" amount (Invoice - Advance - Fee) which is released to you once the customer pays.

Analysis

Cash You Get Today

$0

Advance Amount

Total Fee Cost $0
Effective APR 0%

Annualized Cost of Capital

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How to Use This Calculator

  • Invoice Amount: Enter the total value of the invoice you plan to factor.
  • Advance Rate: The percentage of the invoice value the factor pays you immediately (typically 80-90%).
  • Factoring Fee: The discount fee charged by the factor (e.g., 3%).
  • Days Outstanding: How long it will take your customer to pay the invoice. The longer it takes, the higher your effective APR may be if fees are time-based.

What is Invoice Factoring?

Invoice factoring is a financial transaction and a type of debtor finance. In a factoring agreement, a business sells its accounts receivable (invoices) to a third party (called a factor) at a discount. A business will sometimes factor its receivable assets to meet its present and immediate cash needs.

It is distinct from a bank loan because the credit decision is strictly based on the creditworthiness of your customers, not your business. This makes it an attractive option for startups, businesses with poor credit, or companies experiencing rapid growth that outpaces their cash flow.

While effective for immediate working capital, the annualized cost (APR) can be significantly higher than traditional financing. Use this calculator to understand the true cost of capital before signing a factoring agreement.

Factor Rates vs. APR: Understanding the True Cost

Invoice factoring companies often quote a factor rate (a flat percentage like 3%) rather than an APR (Annual Percentage Rate). This can be misleading because the actual annualized cost depends heavily on how long your customer takes to pay. A 3% fee on a 30-day invoice translates to a 36% APR, but on a 60-day invoice, it's only 18% APR.

Metric Factor Rate (Flat Fee) APR (Annualized)
Definition One-time fee charged on invoice value Annualized cost if fee repeated all year
Example: 3% on $10,000 $300 fee (fixed) 36% APR if paid in 30 days
Time Sensitivity Same fee regardless of days APR decreases as days increase
Best For Comparing Same factor over time Comparing to traditional loans

Advance Rates: What to Expect by Industry

The advance rate is the percentage of the invoice you receive immediately. Factors hold back a reserve (typically 10-20%) until your customer pays. Advance rates vary significantly by industry based on risk profiles:

Hidden Fees to Watch For

The quoted factor rate is rarely the only cost. Before signing any agreement, ask about these common additional fees:

Small Business Eligibility Checklist

Invoice factoring has fewer requirements than traditional bank loans. Most factors evaluate your customers' credit, not yours. Here's what you typically need:

✅ Eligibility Checklist

  • ☑️ B2B Invoices Only: You sell to other businesses (not consumers).
  • ☑️ Creditworthy Customers: Your customers are established businesses with good payment history.
  • ☑️ Net Terms Invoices: You invoice with Net 30, Net 60, or similar payment terms.
  • ☑️ No Existing Liens: Your receivables aren't already pledged as collateral to another lender.
  • ☑️ Clean Invoices: Invoices are for work already completed—no progress billing or deposits.
  • ☑️ No Concentrations (Preferred): No single customer represents more than 50% of your volume.

Frequently Asked Questions

How is factoring different from a bank loan?

Bank loans create debt on your balance sheet and require monthly repayments regardless of cash flow. Factoring is not a loan—you're selling an asset (the invoice) at a discount. There's no debt, no monthly payment, and approval depends on your customers' credit, not yours. This makes factoring accessible to startups and businesses with poor credit.

Does invoice factoring hurt my credit score?

No. Standard invoice factoring does not appear on your credit report because it's not a loan. However, some factors may file a UCC-1 lien on your receivables, which can be seen by other lenders. This lien doesn't affect your personal credit score but could impact your ability to get other asset-based financing.

What is the typical cost per $10,000 invoice?

With a typical 3% factor rate and 90% advance, factoring a $10,000 invoice would cost $300 in fees. You'd receive $9,000 upfront (90% advance), then $700 when your customer pays ($10,000 - $9,000 - $300 fee = $700 reserve returned). If paid in 30 days, the effective APR is about 40%. Lower volume or riskier industries may see rates of 4-5% ($400-500 per $10,000).

Recourse vs. Non-Recourse factoring explained

Recourse factoring: If your customer doesn't pay, YOU must buy back the invoice or replace it with another one. Most factors use recourse agreements because it shifts default risk to you.

Non-recourse factoring: The factor absorbs the loss if your customer goes bankrupt (credit risk only). Non-recourse does NOT cover disputes or slow payment—only verified insolvency. Non-recourse comes with higher factor rates (1-2% more) due to increased risk for the factor.

How long does it take to get funded?

Initial setup takes 3-7 business days while the factor verifies your business and your customers' credit. After that, funding is typically same-day or next-day. You submit an invoice in the morning, and funds hit your account by afternoon. Some factors offer 2-hour funding for established clients using their online portals.