Invoice Factoring Cost Calculator
This free calculator estimates what invoice factoring actually costs. Enter the invoice amount, the advance rate, the factoring fee, and the expected days to collect, and it returns the advance you receive up front, the reserve held back, the factoring fee, the net proceeds, and an approximate effective APR.
How invoice factoring cost works
When a business factors an invoice, the factor advances most of the face value immediately at the advance rate (commonly 80 to 90 percent), holds the rest as a reserve, and charges a factoring fee for the financing. Once the debtor pays, the reserve is released net of the fee. The fee is a small percentage, but because it is earned over a short collection period, the annualized cost is much higher, which is why the calculator shows an effective APR.
How the effective APR is estimated
The calculator annualizes the fee over the collection period: the fee divided by the advance, multiplied by 365 divided by the days to collect. This is the honest way to compare factoring against a term loan or line of credit. It assumes a single flat fee and one collection period; real facilities use tiered or per-diem fees and minimums, so treat the result as a directional estimate.
For lenders and factors
The cost a client sees is only half the picture. The other half is the operational cost of verifying, funding, and collecting each invoice. Zolvo automates that servicing work for factoring operations, including invoice verification and payment reconciliation.
Frequently asked questions
How is the cost of invoice factoring calculated?
Factoring cost is driven by the factoring fee, a percentage of the invoice face value the factor keeps for advancing funds and collecting the receivable. The calculator applies a flat fee to the invoice, shows the advance at your advance rate, the reserve held back, and the net proceeds after the fee, then annualizes the fee over the collection period to show an approximate effective APR.
What is the difference between the advance rate and the factoring fee?
The advance rate is how much of the invoice you receive immediately, with the rest held as a reserve and released net of fees once the debtor pays. The factoring fee is the cost of the financing. A high advance rate improves day-one cash; the fee determines what the financing costs.
Why is the effective APR so much higher than the fee?
A 2 to 3 percent fee is earned over a short collection period, often 30 to 60 days. Annualizing that cost over a full year produces an effective APR many times the headline fee, which is why comparing factoring on fee alone understates its true cost.
Are these figures exact?
No. This is an estimate using a single flat fee and one collection period. Real factoring agreements use tiered or per-diem fees, minimums, and other charges, and pricing varies by industry, debtor quality, and volume. Confirm exact terms with the factor.