Invoice Factoring Cost Calculator: True Cost + APR

Your invoice and factor terms

Invoice amount ($) The face value of the invoice you want to factor.

Advance rate (%) Typically 80-95%. The rest is held in reserve.

Factor fee / discount rate (%) Often quoted "per 30 days" or per funding period.

Fee period How often the fee above is charged.

Days until your customer pays Average days sales outstanding for this customer.

Your bank line APR (%) for comparison Enter your line of credit APR, or 0 to skip that comparison.

Your true cost

EFFECTIVE APR EQUIVALENT

--

15% typical low35-40% average70%+ expensive

Cash received upfront--

Total factor fees--

Reserve returned at payment--

Net cash vs. waiting to be paid--

Cost per $1,000 of invoice--

Compare your alternatives

For the same 45 days of waiting:

Option	Cost ($)	APR equivalent
Invoice factoring (above)	--	--
Bank line of credit at 12% APR	--	--
2/10 net 30 early-pay discount to customer	--	--
Wait and get paid in full	$0	0%

A "2/10 net 30" discount costs 2% of the invoice but only accelerates payment by about 20 days, which annualizes to roughly 36% APR. It is often cheaper in dollars than factoring while still speeding up cash flow.

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How factoring pricing works, and why the APR equivalent matters

Invoice factoring sells your unpaid invoice to a factoring company ("the factor") at a discount. The factor advances most of the invoice value up front, holds a reserve, charges a fee, and releases the reserve when your customer pays.

Advance rate: the share of the invoice you receive immediately, usually 80-95%.
Discount rate / factor fee: quoted as a percent per period, for example 2% per 30 days. If your customer pays in 45 days, that is 2 billing periods, so 4% of the invoice.
Reserve: the amount held back (100% minus the advance rate). You get it back, minus fees, once the customer pays.

Factors quote small-sounding fees, but because the money is outstanding for only weeks, the annualized cost is large. A 3% fee on a 30-day invoice annualizes to roughly 36%. That is why factoring typically lands in the 15-70% effective APR range, depending on fees and how long the customer takes to pay. Showing the APR equivalent lets you compare factoring apples-to-apples with a bank line of credit or an early-payment discount.

Neutral by design. This calculator is not run by a factoring company and does not steer you toward factoring. The comparison table shows the alternatives side by side so you can pick the cheapest source of cash for your situation.

FAQs

What is invoice factoring?

Invoice factoring is selling an unpaid B2B invoice to a factoring company at a discount in exchange for immediate cash. The factor collects from your customer and keeps a fee.

What does factoring typically cost?

Advance rates of 80-95% and fees of roughly 1-5% per 30 days are common. Annualized, that works out to roughly 15-70% effective APR depending on the fee structure and how many days the invoice is outstanding.

Why does the APR equivalent matter?

Factors quote per-period fees that sound small (for example "2% per month"), which hides the true cost. Converting to an effective APR puts factoring on the same scale as loans and credit lines so you can compare honestly.

Is factoring cheaper than a bank line of credit?

Usually not. A bank line at 8-15% APR is almost always cheaper than factoring, which annualizes to 15-70%. Factoring's advantage is speed and accessibility for businesses that cannot get bank credit, not price.

What is the difference between recourse and non-recourse factoring?

With recourse factoring, you must buy back the invoice if your customer never pays; it carries lower fees. With non-recourse factoring, the factor absorbs the credit risk of customer non-payment, and charges higher fees for it.

What is the difference between factoring and invoice financing?

Factoring sells the invoice; the factor owns it and collects. Invoice financing keeps the invoice in your name and uses it as collateral for a loan. Financing is usually structured with a stated APR, making costs easier to compare.