Free Financial Tool
Invoice Factoring Cost & Advance Calculator
Model upfront cash advances, discount fees, reserve refunds, and effective annual costs across varying payment cycles.
Calculator Parameters
$
70% (Conservative)
85% (Average)
98% (Freight/Spot)
0.5% (High volume)
2.0% (Standard)
5.0% (Small spot)
Estimated Funding Summary
Upfront Advance
Factoring Fee
Reserve Refund
Immediate Cash Advance
Wired within 24 hours
$85,000
Estimated Factor Fee
Cost of financing facility
$2,000
Reserve Refund to You
Paid once customer clears invoice
$13,000
Total Net Funding Realized
Advance + Net Reserve
$98,000
Effective Annualized Rate (APR)
Annual equivalent benchmark
28.6%
How Factoring Fees are Calculated
Unlike a standard bank amortized loan where interest accrues monthly on an outstanding principal balance, factoring fees are computed directly against the gross face value of the invoice.
Most factoring companies use one of two fee models:
- Flat Rate Factoring: A single fixed fee (e.g. 2.5%) regardless of whether the customer pays on Day 10 or Day 45. This structure is common in freight factoring.
- Tiered Rate Factoring (Stepped Fee): A baseline fee for the initial 30 days (e.g. 1.5%), followed by an incremental surcharge (e.g. 0.5%) for every subsequent 10 or 15 days the invoice remains outstanding.
Watch Out for Hidden Surcharges
When comparing factoring offers, always inquire about application fees, UCC search/filing fees, lockbox administration fees, minimum monthly volume fees, and wire transmission fees. Check our Factoring Contract Red Flags Guide to avoid unexpected charges.