Invoice Factoring Calculator

Invoice factoring means selling your unpaid customer invoices to a third-party company, called a factor, in exchange for immediate cash instead of waiting 30, 45, or 60 days for payment. The factor advances most of the invoice value upfront — typically 80% to 90% — then pays you the remaining balance, minus its fee, once your customer settles the invoice. In plain terms, it converts money you're already owed into cash today, at a discount, without creating new debt on your books.

An invoice factoring calculator multiplies your invoice by the advance rate to find cash now, then applies the factoring fee for each 30-day period until payment. It shows the reserve held back, the rebate released when your customer pays, your net proceeds, and the effective APR. In our default example, a $100,000 invoice returns $85,000 up front and $97,000 net after a $3,000 fee.

Recourse factoring means you must buy back an invoice if your customer never pays, so you carry the non-payment risk. Non-recourse factoring shifts that risk to the factoring company, which absorbs the loss instead. Because the factor takes on more risk with non-recourse deals, it usually charges higher fees. This choice changes who eats a bad debt, so read your agreement closely.

The reserve is the part of your invoice the factor holds back until your customer pays. In our example, the factor advances $85,000 and holds a $15,000 reserve. When the customer pays in 45 days, the factor releases the reserve minus its fees. That means a $12,000 rebate here, since the $3,000 fee comes out of the $15,000 reserve first.

No, invoice factoring is a sale of your receivables, not a loan. You sell unpaid invoices to a factoring company for immediate cash instead of borrowing money you must repay. Because it is a sale, factoring does not add debt to your balance sheet. This is a key difference from a merchant cash advance or a bank line of credit.

A good advance rate typically falls between 80% and 90% of the invoice value, and factoring fees usually run 1% to 5% per 30-day period. Higher advance rates and lower fees favor your business. Faster-paying customers also lower your total cost, since fees accrue for each period the invoice stays open. Compare offers using this factoring calculator before you sign.

Lower your effective APR by working with faster-paying customers and negotiating a lower fee per period. In our example, a 45-day payment on a 1.5% fee produces a 28.63% APR. If the same customer paid in 30 days, only one fee period would apply, cutting the cost and the APR. You can also learn more in our small business financing guide.

Most factoring companies wire your advance within 24 to 48 hours after approving your first invoice, and repeat draws on already-approved customers can fund same-day. The setup itself — verifying your invoices and your customer's credit — is usually the slower step, often taking a few days to a week for a new account. Once that groundwork is done, ongoing factoring is one of the fastest ways to convert receivables into cash.

No. Factoring approval is based mainly on your customer's creditworthiness, not yours, since the factor is advancing against an invoice your customer owes. That makes it accessible to newer or lower-credit businesses that would not qualify for a traditional bank loan, as long as they bill creditworthy commercial or government customers. Your own credit history can still affect fee pricing, but it is rarely a disqualifying factor the way it is for a term loan.

It depends on whether your deal qualifies as a sale or a secured loan under GAAP. See our guide on how to account for invoice factoring for the exact journal entries, the reserve and rebate treatment, and the balance-sheet impact of each case.