Cost of capital
Invoice factoring calculator
See what you receive up front, what the factor keeps and what factoring an invoice really costs per year.
How this is calculated
Advance = invoice × advance rate · Fee = invoice × fee rate × 30-day periods · Rebate = invoice − advance − fee
Effective annual rate = fee ÷ advance × 365 ÷ days the invoice is open. It is a simple yearly rate because the advance is repaid in one amount when your customer pays.
Worked example
Factoring a $50,000 invoice at an 85% advance gives you $42,500 up front. At 3% per 30 days and a customer who pays in 45 days, the fee covers two periods: $3,000. When the customer pays, you receive the $4,500 rebate. The cost works out to 57.25% a year.
Assumptions
- The fee is charged on the invoice amount for each 30 days, or part of 30 days, the invoice is open. Some factors charge daily or in 10- or 15-day blocks.
- Your customer pays the invoice in full.
- Application, service or wire fees are not included.
Questions owners ask
What is invoice factoring?
You sell an unpaid invoice to a factoring company. It advances most of the invoice now, collects from your customer, then pays you the rest minus its fee.
What is the difference between recourse and non-recourse factoring?
With recourse factoring you must buy back the invoice if your customer does not pay. Non-recourse moves some of that risk to the factor, usually for a higher fee.
Why is the annual rate so high?
A 3% fee for 45 days repeats about eight times in a year. The annual rate shows that cost on the same yearly scale as a loan.
Read before you borrow
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Read the guide ↗Calculators give estimates for educational purposes only. They are not an offer, approval or commitment to lend. Actual rates, fees, terms and payments are set by independent providers and depend on their review. ScaleKit Financing is operated by Arch Ventures LLC and is not a lender.