About the Invoice Factoring Calculator
Invoice factoring turns unpaid customer invoices into cash now. A factoring company advances most of the invoice value — typically 70% to 95% — holds the rest in reserve, and when your customer pays, returns the reserve minus its fee. This calculator shows exactly how much you receive upfront, what the factoring fee costs, the rebate you get later and the effective annual percentage rate (APR) of the financing.
Factoring fees are usually quoted as a percentage of the invoice per period, such as 3% per 30 days, but the way they accrue matters. Choose a flat fee charged once, a tiered fee charged for every started period (a 31-day payment costs two periods), or a prorated fee that accrues daily. Add any fixed charges such as application, ACH or wire fees.
The effective APR divides the total cost by the money you actually received in the advance and annualizes it over the days the invoice was outstanding. Because the cost is charged on the full invoice but you only get the advance, and over weeks rather than a year, a fee that sounds small often works out to an APR well above a bank line of credit. Use it to compare factoring offers, or factoring against other short-term financing.
With the default inputs, the effective apr is 57.3%. Change any value above to recalculate instantly.
How to use the invoice factoring calculator
- 1Enter the invoice amount and the advance rate the factor offers.
- 2Enter the fee rate and the length of each fee period, such as 3% per 30 days.
- 3Choose how the fee accrues: tiered, prorated or flat.
- 4Enter how many days your customer usually takes to pay and any fixed fees.
- 5Compare the advance, total fees and effective APR — and check the table for slower payment.
Formula and method
The advance is the invoice face value I times the advance rate a; the remainder is held in reserve. The factoring fee is the fee rate f times the invoice times k, the number of fee periods: k = 1 for a flat fee, the number of started periods (days ÷ period, rounded up) for a tiered fee, or exactly days ÷ period for a prorated fee. Fixed fees are added on top.
When your customer pays, the factor keeps its fees from the reserve and rebates the rest. The effective APR treats the advance as the amount borrowed and the total fees as the interest cost for d days, annualized with simple interest over a 365-day year. It is a simple-interest estimate; compounding would make the annual cost higher still.
- I
- Invoice face value
- a
- Advance rate (as a decimal)
- f
- Fee rate per period (as a decimal)
- k
- Number of fee periods charged
- d
- Days until the customer pays
Worked examples
$50,000 invoice, 85% advance, 3% per 30 days, paid in 45 days
You receive $42,500 upfront. Payment after 45 days spans two 30-day periods, so the tiered fee is 2 × 3% × $50,000 = $3,000, and the rebate is $7,500 − $3,000 = $4,500. Paying $3,000 to use $42,500 for 45 days is an effective APR of $3,000 ÷ $42,500 × 365 ÷ 45 ≈ 57.3%.
Same invoice with a prorated fee
Prorated daily, 45 days is 1.5 periods, so the fee is 1.5 × 3% × $50,000 = $2,250 and the rebate rises to $5,250. The effective APR falls to about 42.9%.
$20,000 invoice, 90% advance, 2.5% flat fee plus $150, paid in 30 days
The advance is $18,000 and the flat fee $500, plus $150 of fixed fees for $650 in total. The rebate is $2,000 − $650 = $1,350, and the cost of $650 for 30 days on $18,000 is about 43.9% a year.
Frequently asked questions
What is a typical invoice factoring fee?+
Factoring fees commonly run from about 1% to 5% of the invoice value per 30 days, depending on your customers’ credit, invoice volume, industry and whether the factoring is recourse or non-recourse. Fixed fees can add to the cost, so compare total cost, not just the rate.
How is factoring different from a loan?+
With factoring you sell the invoice to the factor, which collects from your customer, so approval depends mostly on your customer’s credit. A loan or line of credit is debt you repay yourself, usually at a lower annual cost but with stricter approval based on your own business.
What is the difference between recourse and non-recourse factoring?+
In recourse factoring you must buy back or replace invoices your customer fails to pay. Non-recourse factoring shifts some credit risk, usually only customer insolvency, to the factor, and typically carries a higher fee and stricter customer approval.
Why is the effective APR so much higher than the factoring fee?+
The fee is charged on the full invoice but you only receive the advance, and it covers weeks rather than a year. A 3% fee for 30 days on an 85% advance is about 3.5% for one month, or roughly 43% when annualized.
Is invoice factoring the same as invoice financing?+
Not exactly. In factoring you sell invoices and the factor usually collects from your customers. In invoice financing (discounting) you borrow against invoices, keep collecting them yourself, and repay the lender when customers pay.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.