Invoice Factoring Calculator
See what factoring really costs per dollar of accelerated cash — including the annualized APR competitors omit and the recourse tradeoff.
Written by Dorothy Ibrahim, 10+ years in banking & finance
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How we calculate this
This calculator prices invoice factoring the way you should evaluate it: as the cost of getting your own money sooner. It computes the cash advanced now, the fee the factor keeps, the reserve returned when your customer pays, and — the number factoring companies rarely show — the APR equivalent of that fee annualized over the days you actually waited. A fee that sounds like 2.5% can annualize to nearly 50%.
The formulas
- Advance (cash now)
- invoice amount × advance rate
- Fee periods
- expected days until the customer pays ÷ fee period length, rounded upA 45-day wait on a 30-day fee period means 2 periods — you are charged for the full second period.
- Total factoring fee
- fee base (invoice amount or advance, per your agreement) × fee % × number of periods
- Reserve returned
- invoice amount − advance − total feeIf the fee exceeds the held-back reserve, you would owe money back — the tool flags this.
- Cost per dollar advanced
- total fee ÷ advance
- Simple APR (quick estimate)
- (total fee ÷ advance) × (365 ÷ days-to-pay)Linear annualization — the standard number to compare against a line of credit or term loan quoted as an annual rate.
- Exact APR (effective annual rate)
- (1 + total fee ÷ advance) ^ (365 ÷ days-to-pay) − 1Compounds the per-advance fee across every collection window in a year, so it runs higher than the simple APR.
Worked example
- Say you factor a $25,000 invoice at an 85% advance rate, with a 2.5% fee per 30 days charged on the invoice amount, and the customer is expected to pay in 45 days.
- You receive $25,000 × 85% = $21,250 now.
- 45 days spans 2 fee periods (45 ÷ 30, rounded up), so the fee is $25,000 × 2.5% × 2 = $1,250.
- When the customer pays, the reserve returned is $25,000 − $21,250 − $1,250 = $2,500.
- Cost per dollar advanced = $1,250 ÷ $21,250 = about $0.06 per $1.
- Simple APR: $0.0588 per dollar × (365 ÷ 45) = roughly 47.71% — the quick figure to compare against a line of credit.
- Exact APR (effective): compounding that fee across the ~8.1 collection windows in a year, (1.0588)^(365 ÷ 45) − 1 = about 58.98%. Either way, you paid $1,250 to get $21,250 about 45 days sooner.
Rates, benchmarks & sources
- Advance, fee, reserve, and the annualized APR are computed from the rates you enter. — Arithmetic on your own factoring terms (no external constants)
- Verdict tiers shared with the MCA tool: under 36% expensive but sometimes rational; 36–100% very high cost; above 100% costs more than almost any alternative. — Rule-of-thumb interpretation bands (spec §7 1.4)
- The note that non-recourse factoring typically costs about 0.5–1.5 points more than recourse. — Industry rule of thumb
Figures current as of 2026-07-02. See our methodology & editorial standards for how constants are versioned and verified.
What this tool doesn’t model
- The APR depends heavily on when your customer actually pays — pay in 31 days instead of 45 and you may still be charged the same 2 periods, raising the effective rate; slower payment adds periods and cost.
- This is an estimate of the terms you enter, not an offer — factors underwrite your customers' credit (not just yours), and real agreements add items not modeled here: origination fees, minimum volume commitments, lockbox fees, and termination clauses.
- Recourse risk is flagged but not priced: under recourse factoring, an invoice your customer never pays comes back to you, and that contingent loss is not in the APR.
- Assumes a single invoice; whole-ledger or contract factoring with monthly minimums behaves differently.
Frequently asked questions
The factor quoted 2.5% — why does the calculator show 48% and 59%?
All three are true; they measure different things. The 2.5% is a fee per 30 days on the invoice face value. You effectively borrowed $21,250 for about 45 days and paid $1,250 for it: annualize that linearly and it is roughly a 47.71% simple APR — the number that lets you compare factoring against a line of credit or term loan quoted in annual terms. Compound that same fee across the roughly eight collection windows in a year and the effective annual rate (EAR) is about 58.98%. The simple APR is the fairer apples-to-apples comparison; the exact (effective) APR shows the true cost if you factor on this cadence all year.
What is the difference between recourse and non-recourse factoring?
Recourse (the default here, and the cheaper kind) means that if your customer never pays, the factor puts the invoice back on you — you absorb the loss. Non-recourse shifts qualifying credit losses to the factor and typically costs about 0.5–1.5 points more per period. Read the definition of "non-recourse" in the agreement carefully; it usually covers insolvency, not disputes.
What is the reserve and when do I get it?
The factor advances only part of the invoice (85% in the example) and holds the rest as a reserve. When your customer pays the full $25,000, the factor keeps its $1,250 fee and releases the remaining $2,500 to you. If collection drags on and fees pile up past the held-back amount, the reserve goes negative — meaning you would owe the factor money — and the tool warns you.
Is there a cheaper way to get paid faster?
Often, yes. Offering the customer an early-payment discount such as 2/10 net 30 costs 2% for roughly 20 days of acceleration, and drawing on a line of credit is usually far cheaper than a mid-double-digit factoring APR. Factoring earns its place when you lack credit access, need the factor's collections muscle, or the customer's credit is stronger than yours.
Will a factoring company actually give me these terms?
This tool computes the cost of terms you enter — it does not predict them. Real pricing depends on your industry, invoice sizes, monthly volume, and above all your customers' payment history and creditworthiness, since the factor is really underwriting them. Use the output to compare quotes and to see the annualized cost a per-period fee quietly implies.
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themoneysheet provides educational estimates, not financial, tax, or legal advice. Figures use published rates and formulas current as of the date shown, but your situation may differ. Consult a qualified professional (CPA, attorney, or licensed advisor) before making financial decisions. Rates shown are estimates; actual offers depend on lender underwriting.