Enter your invoice amount, advance rate, fee rate, and expected payment days to see exactly how much cash you receive upfront, what fees are deducted, and your total net proceeds from factoring.
Invoice Details
$
The total face value of the invoice you are factoring.
days
How many days until your customer is expected to pay the invoice.
Factoring Terms
%
Percentage of invoice paid to you upfront. Typically 70–95%.
%
Fee charged on the invoice amount per 30-day period. Typically 1–5% per month.
Factoring Breakdown
Invoice amount—
Initial advance—
Reserve held—
Factoring fee—
Final remittance (reserve − fee)—
Total cash received—
Effective cost—
Initial Advance
—
Factoring Fee
—
Total Received
—
Fee is calculated as: Invoice Amount × Fee Rate × (Expected Days ÷ 30). Actual factoring contracts may include minimums, recourse terms, or additional fees not reflected here.
About the Invoice Factoring Calculator
Invoice factoring lets businesses convert outstanding receivables into immediate working capital — without waiting 30, 60, or 90 days for customers to pay. This calculator breaks down exactly how much you receive upfront, what fees are deducted, and your total net proceeds so you can evaluate whether factoring makes sense for your cash flow situation.
Invoice Factoring Formulas
Initial Advance = Invoice Amount × Advance Rate
Reserve Amount = Invoice Amount − Initial Advance
Factoring Fee = Invoice Amount × Fee Rate × (Days ÷ 30)
Final Remittance = Reserve Amount − Factoring Fee
Total Received = Initial Advance + Max(0, Final Remittance)
Effective Cost = Invoice Amount − Total Received
Understanding the Two-Payment Structure
Factoring happens in two stages. First, you receive the initial advance — typically 70–95% of the invoice — immediately after submitting it to the factor. Second, once your customer pays the invoice (directly to the factoring company), the factor releases the reserve balance minus their fee as a final remittance. Your total cash received is the sum of both payments.
When Factoring Makes Sense
Payroll and operating gaps — When slow-paying clients create cash flow timing problems
Growth financing — Fund new orders or projects while waiting on outstanding invoices
Creditworthiness — Approval is based on your customer's credit, not yours
No collateral required — The invoice itself is the asset being purchased
Factoring vs. Invoice Financing
In factoring, the factor buys your invoice and collects from your customer directly. In invoice financing (discounting), you use invoices as collateral for a loan and remain responsible for collections. Factoring is simpler but means your customers know you are using a factor. Financing keeps the relationship private but requires stronger credit on your side.
This calculator uses a simplified fee model. Actual factoring agreements may include volume minimums, recourse provisions, concentration limits, and additional fees. Not financial advice.
Frequently Asked Questions
What is invoice factoring?
Invoice factoring is a form of accounts receivable financing where a business sells its outstanding invoices to a third-party factoring company at a discount in exchange for immediate cash. The factor advances a percentage of the invoice value upfront (typically 70–95%), then collects payment directly from your customer. Once the customer pays, the factor releases the remaining reserve minus their fee. It is not a loan — you are selling a receivable, not borrowing against it.
How do you calculate factoring fees?
Factoring Fee = Invoice Amount × Fee Rate × Time Multiplier, where Time Multiplier = Expected Payment Days ÷ 30. For example, a $20,000 invoice with a 3% fee rate and 45-day expected payment: Fee = $20,000 × 0.03 × (45 ÷ 30) = $900. Many factors quote fees per 30-day period, so longer payment terms increase the total fee proportionally.
What is an advance rate in invoice factoring?
The advance rate is the percentage of the invoice value that the factoring company pays you upfront. Typical advance rates range from 70% to 95% depending on industry, customer creditworthiness, invoice size, and factoring company. The remaining percentage (the reserve) is held until your customer pays the invoice, at which point the reserve minus the factoring fee is released back to you.
What is the reserve in invoice factoring?
The reserve is the portion of the invoice not advanced upfront. Reserve = Invoice Amount − Initial Advance. If you factor a $10,000 invoice at an 85% advance rate, you receive $8,500 upfront and $1,500 is held in reserve. When your customer pays the invoice, the factor releases the reserve minus their fee. If the fee exceeds the reserve, you receive no final remittance.
What happens if the factoring fee exceeds my reserve?
If factoring fees are higher than the reserve amount, you will receive no final remittance after the customer pays. Your total cash received equals only the initial advance, and the effective cost equals the full reserve amount. This situation can arise with low advance rates, high fee rates, or slow-paying customers. This calculator shows a warning when fees exceed the reserve.
Is invoice factoring the same as invoice financing?
No, though the terms are often confused. Invoice factoring involves selling your invoices to a factor, which then collects from your customers directly. Invoice financing (or invoice discounting) uses invoices as collateral for a loan — you retain control of collections. Factoring is simpler and does not require creditworthiness on your part, but it means your customers interact with the factoring company rather than you.
What is the effective cost of invoice factoring?
Effective Cost = Invoice Amount − Total Cash Received. Total Cash Received = Initial Advance + Max(0, Final Remittance). This represents the real dollar cost of accessing your cash early. Expressed as a percentage: Effective Cost % = (Effective Cost ÷ Invoice Amount) × 100. Compare this against your working capital needs and the cost of alternatives like a business line of credit.
