Calculator
Invoice factoring true cost calculator
Factoring is priced as a small percentage of face value per 30 days, which sounds cheap. Because you only receive the advance and only hold the money for a few weeks, the annualised cost is much higher. This tool converts your numbers into an annual cost range and an effective APR.
Educational estimates only. This page is general information, not financial advice. Cost of Financing does not offer, broker or arrange loans, and we accept no lender sponsorships, referral fees or lead payments.
Your numbers
Face value of the invoices you sell each month.
Typical range 1 to 5 percent per 30 days.
Typical range 80 to 95 percent. The rest is held back until your customer pays.
Most books sit between 30 and 60 days.
Effective APR
58.8% to 83.0%
Central estimate 69.2% on the cash actually advanced to you.
Total annual cost
$49,980 to $70,560
All factoring fees you would pay across twelve months at this volume.
Line items, annual
Factoring fee
2.5 percent per 30 days across 45 day terms
$45,000
Origination fee
$6,000
Service or minimum fees
$1,800
ACH and wire fees
20 invoices per month
$6,000
Central annual total
$58,800
Cash advanced per month
85 percent of face value
$85,000
Cost per funding cycle
about 8.1 cycles per year
$7,249
How we estimate this
The headline factor rate is charged on the full face value of the invoice, not on the money you receive. We therefore compute the fee on face value, then measure it against the cash actually advanced to you, which is the advance rate multiplied by face value.
We annualise by counting how many funding cycles fit into a year. At 45 day terms that is about 8.1 cycles. A fee that looks like a small percentage per cycle becomes a large annual number once you repeat it that many times.
- Factoring fee equals monthly volume multiplied by the factor rate, scaled for how many 30 day periods your invoices are outstanding.
- Effective APR equals the cost per cycle divided by the cash advanced, multiplied by the number of cycles per year.
- The published range applies a spread of about 15 percent below and 20 percent above the central figure. That covers reserve release delays, late paying customers, tiered rate steps and fees that only appear in the master agreement.
What this model does not capture
- Recourse costs if a customer never pays and you must buy the invoice back.
- Termination or early exit fees on annual contracts with volume minimums.
- Credit check, lockbox, audit and same day funding surcharges.
- The value of the back office collections work some factors include.
Read the full methodology for sources and update cadence.
Educational estimates only. This page is general information, not financial advice. Cost of Financing does not offer, broker or arrange loans, and we accept no lender sponsorships, referral fees or lead payments.