Factoring Fee Calculator
This factoring fee calculator shows the exact fee, cash advance, and effective APR when you factor a single invoice. A factoring fee is the discount a factor keeps for advancing cash against your invoice before your customer pays. Enter your invoice amount, advance rate, factor fee, and days until payment below to see your advance, reserve, rebate, and net proceeds in seconds.
This tool lives under our invoice factoring hub. To model an ongoing financing arrangement instead of one invoice, use our accounts receivable financing calculator.
How it's calculated
A factoring fee calculator multiplies your invoice by the advance rate for cash now, then applies the factor fee against the full invoice. The tool first finds your advance: invoice amount times the advance rate. The rest is the reserve, held until your customer pays. The factoring fee is charged on the invoice value, and once the customer settles, you get the reserve back minus that fee. Net proceeds are the advance plus the rebate.
The insight worth catching is that a higher advance rate does not lower your fee. A 90% advance simply gives you more cash up front, but the fee still applies to the whole invoice. And because the fee is charged over a short window, a 3% fee on a 30-day invoice becomes roughly a 40% effective APR. Short terms make small fees expensive on an annualized basis.
A worked example
Factor a $25,000 invoice at a 90% advance rate, a 3% factor fee, and 30 days until payment. Your advance today is $22,500, with a $2,500 reserve held back.
When your customer pays, the fee is $750, so your rebate is $1,750 and net proceeds are $24,250 on the $25,000 invoice. Because the $750 fee is charged over just 30 days, the effective APR is about 40.56%, far higher than the 3% the fee first appears to be.
Common mistakes to avoid
- Assuming a higher advance rate lowers the fee. The fee is charged on the full invoice regardless of how much you draw up front.
- Reading the fee as annual. A 3% fee over 30 days is closer to a 40% effective APR, not 3% a year.
- Forgetting the reserve is returned only after your customer pays, minus the fee.
- Not checking whether tiered fees apply, where the fee rises the longer an invoice stays unpaid.
- Comparing factoring fees to loan interest rates without annualizing both into APR first.
Frequently asked questions
How does a factoring fee calculator work?
A factoring fee calculator multiplies your invoice by the advance rate to find cash now, applies the factor fee to the full invoice, and annualizes it. On a $25,000 invoice at 90% with a 3% fee, you get $22,500 up front and pay a $750 fee.
How is a factoring fee calculated?
The factoring fee is a percentage of the full invoice value, not just the advance. On a $25,000 invoice at a 3% fee, the fee is $750. You receive that back out of your reserve when the invoice is paid, leaving a $1,750 rebate.
Does a higher advance rate reduce the fee?
No. A higher advance rate gives you more cash up front but does not change the fee, which is charged on the whole invoice. A 90% advance on a $25,000 invoice still carries the same 3% fee, or $750.
Why is the effective APR so high on a low fee?
Because the fee is charged over a short window. A 3% fee on a 30-day invoice works out to about a 40.56% effective APR once annualized. The shorter the payment window, the higher the APR on the same flat fee.
What are net proceeds when factoring an invoice?
Net proceeds are your advance plus the rebate, which is the reserve minus the fee. On a $25,000 invoice at 90% with a 3% fee, that is $22,500 plus a $1,750 rebate, or $24,250 total on the $25,000 invoice.
Sources
We prioritize primary sources for rules, formulas, rates, limits, and definitions. See our calculator methodology and editorial policy.
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