The headline number and what sits underneath it
In 2026 most small business factoring quotes land between 1 and 3 percent of invoice face value per 30 days for straightforward business to business receivables with creditworthy customers. Trucking, staffing and construction receivables sit higher, commonly 2.5 to 5 percent, because payment behaviour is slower and disputes are more common.
The advance rate is the second lever. A typical range is 80 to 95 percent. Transportation factoring often advances 90 to 95 percent, staffing sits around 90 percent, and construction or medical receivables can drop to 70 or 80 percent because of retention and payer risk. The remainder is a reserve that is released once your customer pays, minus the fees.
Worked example on a real book
Take a business factoring $100,000 of invoices a month at a 2.5 percent factor rate per 30 days, an 85 percent advance and average payment at 45 days. The factoring fee is 2.5 percent scaled to 45 days, so about 3.75 percent of face value per invoice, which is $3,750 a month or $45,000 a year. On top of that a 0.5 percent origination charge adds $6,000 a year, a $150 monthly minimum adds $1,800, and $25 wire fees on 20 invoices a month add $6,000.
The all in annual cost is close to $58,800. The cash actually advanced is $85,000 at any given point in the cycle. Annualised against the money you genuinely have use of, that is an effective APR in the region of 55 to 60 percent. The quote said two and a half percent.
Fees that rarely appear in the quote
- Minimum volume fees. If your book dips below the contracted monthly minimum, you pay the shortfall anyway.
- Reserve release delays. Some agreements release the reserve on a weekly batch rather than the day the payment clears, which quietly extends your funding cycle.
- Aging or overdue surcharges. Extra percentage points once an invoice passes 60 or 90 days, often stacked per additional 10 or 15 day block.
- Recourse buybacks. On a recourse facility, an unpaid invoice is charged back to you, usually with the fees already taken.
- Termination and notice fees. Annual contracts with 60 or 90 day exit notice, plus a termination charge if you leave early.
- Lockbox, credit check, audit, UCC filing and same day funding charges.
When factoring is still the right call
A high effective APR is not automatically a bad deal. Factoring is priced for access rather than for cheapness. It is worth the cost when the alternative is turning down work, missing payroll or paying suppliers late. If a $50,000 order carries a 25 percent gross margin and factoring costs 4 percent of face value to fund it, you are still well ahead. The failure mode is using factoring as permanent working capital when a cheaper facility is available.
Factoring also transfers some administrative load. Non recourse facilities absorb credit losses on approved customers, and many factors handle collections. That has real value if you do not have a credit and collections function.
How to compare two factoring quotes honestly
- Convert both to cost per dollar advanced, not cost per dollar invoiced.
- Use your real average days to payment, not the terms printed on the invoice.
- Add every fixed fee to the annual total before comparing.
- Ask when the reserve is released and whether the clock runs on cleared funds.
- Ask for the fee schedule as an appendix, not a verbal summary.
What to expect in the rest of 2026
With prime at 6.75 percent, factoring pricing has softened slightly from the peak but remains well above the levels of the early 2020s. Competition from fintech factors has compressed rates in trucking and staffing more than in construction. Expect the spread between the best and worst quote you receive to remain wide, often two full percentage points on the same receivables, which is why collecting three quotes is worth the effort.