Invoice Factoring Calculator

How Much Will Invoice Factoring Cost Your Business?

Invoice factoring turns your unpaid invoices into immediate working capital. Instead of waiting 30, 60, or 90 days for customers to pay, a factoring company advances you 80% to 90% of the invoice value upfront. When the customer pays, you receive the remaining balance minus the factoring fee. This calculator shows you exactly what that process costs with your numbers.

The true cost of factoring depends on three main variables: the fee rate (typically 1% to 5% per 30 days), how quickly your customers pay, and whether there are additional processing fees. A 3% fee on a Net 30 invoice is straightforward. But if your customers take 60 days, that same rate effectively doubles because the fee accrues per 30-day period. This calculator handles that math automatically.

Understanding the Effective APR

Factoring is not a loan, so comparing it to loan APR is not a perfect match. Still, the annualized rate helps put the cost in context. A 3% factoring fee on a 30-day invoice translates to roughly 36% to 43% APR equivalent. That sounds high, but the comparison is misleading if you only need funds for 30 days. A business line of credit at 12% APR would cost less in interest, but may require stronger credit and take weeks to set up. Factoring can fund within 24 hours.

Factoring vs. Other Financing

For one-time cash flow gaps, factoring is fast and accessible. For ongoing working capital needs, the annual cost adds up. If you factor $50,000 per month at 3%, that is $18,000 per year in fees. A line of credit or term loan would likely cost less for the same access to capital. Use our line of credit interest calculator to compare costs directly.

Who Uses Invoice Factoring?

B2B businesses with creditworthy customers and long payment cycles are the primary users. Trucking companies, staffing agencies, manufacturers, construction firms, and wholesale distributors all rely on factoring to bridge the gap between completing work and receiving payment. If your customers are established businesses or government agencies paying on Net 30 to Net 90 terms, factoring could be a fit. Approval is based primarily on your customers' creditworthiness, not yours. Check your debt service coverage ratio to see how lenders view your overall capacity, or talk to a funding specialist to explore all your options.