Loading calculator...
- Factoring pays you part of an invoice up front, then releases the rest, less fees, when your customer pays.
- The fee often looks small, but it is charged on the invoice, not on the cash you got. That makes the effective annual rate much higher.
- A $10,000 invoice with an 85% advance and a 3% fee per 30 days, paid in 45 days, costs $600, or about 57% a year.
- Use the effective rate to compare factoring with a line of credit or other financing.
How to use the invoice factoring calculator
Enter the invoice
Type the invoice amount and the advance rate your factor offers, such as 85%.
Enter the fee terms
Add the factoring fee and choose whether it is charged for every 30 days or once as a flat fee.
Add the payment time
Enter how many days your customer is likely to take to pay. Slow payers raise the cost.
Add other fees and volume
Open the advanced option for processing or wire fees and the number of invoices you factor each month.
How invoice factoring cost is calculated
The factor advances a share of the invoice, holds the rest as a reserve and takes its fee. When your customer pays, the factor releases the reserve minus what you owe.
Invoice factoring cost
Advance = invoice × advance rate
Fee = invoice × fee % × number of 30-day periods (or once, if the fee is flat)
Reserve rebate = invoice − advance − all fees
Effective annual rate = total cost ÷ advance × 365 ÷ days outstanding
Each 30-day period that is started counts in full when the fee is charged per 30 days.
Invoice factoring examples
Example 1: A $10,000 invoice paid in 45 days
The advance rate is 85% and the fee is 3% for each 30 days.
- Advance $8,500
- Fee (2 periods × 3%) $600
- Reserve rebate $900
- Total you receive $9,400
- Cost as a % of the invoice 6.0%
- Effective annual rate 57.3%
The headline fee is 3%, but the cost is 6% of the invoice because the customer took more than 30 days.
Example 2: The same invoice paid in 30 days
Same terms, but your customer pays after 30 days.
- Fee (1 period × 3%) $300
- Reserve rebate $1,200
- Total you receive $9,700
- Cost as a % of the invoice 3.0%
- Effective annual rate 42.9%
A faster payment halves the fee, but the annual rate is still high because the money is only borrowed for a month.
Example 3: A flat fee with an extra charge
A 2% flat fee, a $25 processing fee, an 85% advance and payment in 60 days.
- Fee $200
- Other fees $25
- Total cost $225
- Total you receive $9,775
- Effective annual rate 16.1%
A flat fee is cheaper when customers pay slowly, so check how your factor charges before you compare offers.
Things to check in a factoring agreement
- Whether the fee is flat, charged per 30 days or charged per day
- Minimum monthly volume or minimum fees
- Processing, wire, ACH and origination fees
- Whether you factor one invoice or all your invoices
- Recourse: who pays if your customer does not
- Contract length and early exit fees
Who uses an invoice factoring calculator
Freelancers and agencies
Turn slow client payments into cash and see what it costs.
Trucking and logistics
Compare factoring rates against fuel and payroll needs.
Staffing companies
Weigh the cost of paying workers before clients pay you.
Small contractors
Bridge the gap between finishing a job and getting paid.
This is not financial advice. Fees, reserves and rules vary by factor and contract, so use the numbers from your own agreement and read it carefully. To compare other financing, try the loan EMI calculator. For your own rates, see the freelancer hourly rate calculator, and for late payments the effective hourly rate calculator.
Invoice factoring calculator FAQ
How much does invoice factoring cost?
It depends on the fee, the advance rate and how long your customer takes to pay. A 3% fee for each 30 days on a $10,000 invoice paid in 45 days costs $600.
What is an advance rate?
It is the share of the invoice you receive up front. The rest is a reserve, which is released to you after your customer pays, minus fees.
Why is the annual rate so high?
The fee is charged on the full invoice but you only receive part of it up front, and the money is outstanding for weeks, not a year. Annualizing a short-term cost makes it look large.
What is the reserve rebate?
It is the part of the invoice the factor holds back, minus all fees. You get it when your customer pays.
Is factoring the same as a loan?
No. Factoring is a sale of your invoices, not a loan, but comparing the effective annual rate helps you weigh it against financing.
Does the calculator include recourse or chargebacks?
No. If your customer does not pay and your agreement has recourse, you may owe the advance back. Read your contract.