Work out exactly what you get when you sell an unpaid invoice to a factoring company. Enter the advance rate, the fee per period and how long your customer takes to pay to see the cash you get today, the reserve rebate later, the total fee and the effective APR.
Last updated:
Invoice
$
days
From funding to payment
Factoring terms
%
Share paid to you up front
% / period
$
Deducted from the advance
Enter your values to see the result.
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How to use the Invoice Factoring Calculator
Enter the invoice amount and how many days your customer usually takes to pay.
Enter the advance rate and factoring fee from the factor's quote.
Pick the fee period and basis, and whether started periods are charged in full or prorated.
Add any flat fees such as wire, ACH or setup charges.
Press Calculate to see cash now, the rebate later, the total cost and APR, and how the cost grows if payment is late.
Fee periods = days outstanding ÷ period length, rounded up when every started period is charged in full (or left as a fraction when the fee is prorated daily).
Factoring fee = fee base (invoice face value or advanced amount) × fee % × fee periods.
Rebate = reserve − factoring fee, paid to you after your customer pays the factor.
Total cash received = invoice − factoring fee − other fees.
Effective APR = total cost ÷ advance × 365 ÷ days outstanding.
Example: a $25,000 invoice, 85% advance, 2.5% per 30 days, paid after 45 days. You get $21,250 now; the reserve is $3,750. Two periods are charged, so the fee is $1,250 and the rebate is $2,500. You collect $23,750 in total, a cost of 5% of the invoice or about 47.7% APR.
How payment timing changes the cost
Fees stack up for each period the invoice stays open, so a customer who pays a few days late can add a whole period. Here is a $10,000 invoice at 90% advance and 3% per 30 days (fee on face value, started periods charged in full).
Customer pays after
Periods charged
Fee
Rebate
Effective APR
20 days
1
$300
$700
60.8%
30 days
1
$300
$700
40.6%
31 days
2
$600
$400
78.5%
60 days
2
$600
$400
40.6%
90 days
3
$900
$100
40.6%
Tips for comparing factoring quotes
Convert every quote to the same basis. "1% per 10 days" is 3% per 30 days, not 1%.
Check the fee base. A fee on the full face value costs more than the same rate on the advanced amount.
Use your customers' real payment history (your days sales outstanding) rather than the invoice terms.
Read the contract for minimums and termination fees, which can outweigh a low headline rate.
Spot factoring (single invoices) usually costs more per invoice than a contract for your whole ledger, but carries no volume commitment.
Frequently asked questions
How is an invoice factoring fee calculated?
Most factors charge a percentage of the invoice face value for each period the invoice is outstanding. Fee = invoice × fee % × number of periods. A $25,000 invoice at 2.5% per 30 days that is paid in 45 days counts as 2 periods, so the fee is $1,250. Some factors prorate by the day or charge only on the advanced amount, which the calculator supports.
What is the advance rate and the reserve?
The advance rate is the share of the invoice you receive up front, usually 70% to 95%. The rest is the reserve. When your customer pays the factor, the reserve is returned to you minus the factoring fee; that payment is called the rebate.
How do I calculate the APR of invoice factoring?
A simple effective APR is total cost ÷ cash advanced × 365 ÷ days outstanding. For a $1,250 cost on a $21,250 advance held for 45 days, that is about 47.7%. Because the fee steps up each period, short periods and slow-paying customers raise the APR quickly.
What is the difference between recourse and non-recourse factoring?
With recourse factoring you must buy back or replace an invoice the customer does not pay, so fees are lower. Non-recourse factoring shifts the credit risk of customer insolvency to the factor, usually at a higher fee and with stricter customer credit checks.
Is invoice factoring the same as invoice financing?
Not exactly. In factoring you sell the invoice and the factor usually collects from your customer. In invoice financing (discounting) you borrow against the invoice and keep collecting yourself. The math for cost and APR is similar.
What other fees should I ask about?
Ask about application or setup fees, monthly minimum volume fees, wire or ACH charges, credit check fees, termination fees and how late payments are charged. Enter flat per-invoice fees in the Other fees field to include them in the cost and APR.
Are all the tools on FreeToolCabin tested for quality and accuracy?
Yes! Every tool on our site undergoes automated Q/A testing in real browser environments to ensure high precision, correct output, and zero errors. If you happen to spot a bug or have a suggestion, please contact us at [email protected] and our team will review it right away.