Factoring and Accounts Receivable
Factoring Cost Calculator
Calculate your total costs and cash flow impact from factoring invoices.
📋 How Invoice Factoring Works
Complete Work & Invoice Customer
Deliver products/services and issue invoice with net 30-90 day terms
Submit Invoice to Factor
Factor verifies invoice legitimacy and customer creditworthiness
Receive 70-90% Advance
Get immediate cash (typically within 24-48 hours)
Customer Pays Factor Directly
Your customer sends payment to factor at end of terms
Receive Remaining Balance
Factor remits reserve amount minus their fee
⚖️ Recourse vs Non-Recourse Factoring
Recourse Factoring
✓ Lower fees (1-3% per month)
✓ Easier approval
✗ You're liable if customer doesn't pay
✗ Must buy back unpaid invoices
Best for: Established customers with strong credit
Non-Recourse Factoring
✓ Protected from customer bankruptcy
✓ Factor absorbs bad debt risk
✗ Higher fees (2-5% per month)
✗ More stringent customer approval
Best for: New/risky customers, thin margins
💵 Typical Factoring Costs
• Advance Rate: 70-90% of invoice value (upfront cash)
• Factoring Fee: 1-5% per month invoice is outstanding
• Effective APR: 12-60% depending on terms and payment speed
• Application Fee: $0-$500 (often waived)
• Processing Fee: $5-$25 per invoice
• Wire Transfer: $10-$30 per funding
✅ Qualification Requirements
Business Requirements
□ B2B or B2G transactions (not B2C)
□ Operating 3-6+ months
□ $25K-$50K+ monthly revenue
□ Valid business entity & tax ID
□ No recent bankruptcies
Customer Requirements
□ Creditworthy businesses/government
□ Operating 1-2+ years
□ Verifiable payment history
□ No disputes or bankruptcies
□ Diversified (no 50%+ concentration)
⚠️ Choosing a Factoring Company
- • Verify credentials: Check IFA membership, BBB rating, licensing
- • Compare 3-5 factors: Get proposals and calculate total costs
- • Read contracts carefully: Watch for hidden fees, termination penalties
- • Ask for references: Talk to current clients in your industry
- • Avoid long-term locks: Month-to-month or 6-month contracts preferable
- • Attorney review: Spend $500-$1,500 for legal review before signing