Accounts Receivable Financing Calculator
This accounts receivable financing calculator shows how much cash you get today, what you pay in fees, and the real effective APR on an invoice. Accounts receivable financing lets a business turn unpaid invoices into immediate cash by advancing most of the invoice value now. Enter your invoice amount, advance rate, factor fee, and expected days until payment below to see your advance, reserve, and net proceeds.
This tool sits under our invoice factoring hub. To size the fee alone on a single invoice, use our factoring fee calculator. Once you've run the numbers, see our guide on how to account for invoice factoring for the GAAP journal entries behind the advance, reserve, and rebate shown here.
How it's calculated
Accounts receivable financing advances a percentage of your invoice now, holds the rest in reserve, and charges a fee when your customer pays. The calculator starts with the advance: invoice amount times the advance rate. The remaining slice becomes the reserve, held back until your customer settles the invoice. When payment lands, the financer keeps a factor fee and rebates the rest of the reserve to you. Net proceeds are your advance plus that rebate.
The non-obvious point is timing. Because the fee is charged over a short collection window, a fee that looks small as a percentage becomes a large annualized APR. A 2% fee on a 60-day invoice is not 2% a year. Spread across the real days-until-paid, that same fee works out to roughly a 30% effective APR, which is the number that matters for comparison.
A worked example
Take a $50,000 invoice with an 80% advance rate, a 2% factor fee, and 60 days until your customer pays. Your advance today is $40,000, and the reserve held back is $10,000.
When the customer pays, the fee is $2,000, so your rebate is $8,000. Net proceeds come to $48,000 on the $50,000 invoice.
Because the $2,000 fee is charged over just 60 days, the effective APR is about 30.42%, far above the 2% the fee first appears to be.
Common mistakes to avoid
- Reading the factor fee as an annual rate. A 2% fee over 60 days is closer to a 30% effective APR, not 2% a year.
- Forgetting the reserve. You do not get the full invoice up front; a portion is held until your customer pays.
- Ignoring how days-until-paid drives cost. Slow-paying customers stretch the fee window and can raise the effective APR.
- Confusing accounts receivable financing with factoring. In financing you often keep collections; in factoring the buyer collects.
- Overlooking whether the arrangement is recourse, meaning you may owe the money back if your customer never pays.
Frequently asked questions
What is accounts receivable financing?
Accounts receivable financing turns unpaid invoices into immediate cash. A financer advances most of an invoice's value now, holds a reserve, and charges a fee when your customer pays. On a $50,000 invoice at 80%, you receive $40,000 up front.
How much cash do I actually receive?
You receive the advance now and the rebate later. On a $50,000 invoice at an 80% advance rate and a 2% fee, you get $40,000 today and an $8,000 rebate when the customer pays, for $48,000 in net proceeds after the $2,000 fee.
What is the reserve in accounts receivable financing?
The reserve is the portion of your invoice held back until your customer pays. On a $50,000 invoice at an 80% advance, the reserve is $10,000. You get it back, minus the fee, once the invoice settles.
How is the effective APR different from the factor fee?
The factor fee is a flat percentage; the effective APR annualizes it over the collection window. A 2% fee on a 60-day invoice is not 2% a year. Spread across 60 days it works out to about a 30.42% effective APR.
Is accounts receivable financing the same as factoring?
They are close but not identical. With accounts receivable financing you typically keep control of collections. With factoring the buyer collects directly from your customer. Both advance cash against invoices and charge a fee tied to how long payment takes.
Sources
We prioritize primary sources for rules, formulas, rates, limits, and definitions. See our calculator methodology and editorial policy.
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