Skip to content
ENExplore Calculators

Factoring Cost Calculator

Work out factoring cost instantly with clear inputs, formula shown and shareable results.

About Factoring Cost Calculator

Factoring has two charges: a service fee on the face value of the invoice and a discount charge, effectively interest, on the cash advanced until the customer pays. Expressing both against the cash you actually received — assumed over a 60-day collection period — gives the true annualised cost.

Formulas

Cash advanced

Advance = Invoice value x Advance rate %

Total cost

Cost = (Invoice value x Service fee %) + (Advance x Discount rate x Days / 365)

Worked example

With the default values below, Factoring Cost Calculator returns Total factoring cost of $6,353.42. Change any input above and every figure here is recalculated in your browser.

Inputs used

Invoice value factored
200,000
Advance rate
85
Service fee on invoice value
1.5
Discount (interest) rate per year
12

Results

Total factoring cost
$6,353.42
Cash advanced up front
$170,000.00
Discount charge over 60 days
$3,353.42
Effective annual cost on cash advanced
22.74%

Step by step

  1. 1Values used
  2. 2Cash advanced
  3. 3Total cost
  4. 4Total factoring cost= 6,353.42
  5. 5Cash advanced up front= 170,000.00
  6. 6Discount charge over 60 days= 3,353.42
  7. 7Effective annual cost on cash advanced= 22.74

Assumptions and limits

  • The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation or tax into account.
  • Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
  • This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

Why is the effective rate so much higher than the headline fee?

Because the service fee is charged on the full invoice but you only receive the advance, and you hold that cash for weeks rather than a year.

Is recourse or non-recourse cheaper?

Recourse factoring is cheaper because you retain the credit risk. Non-recourse prices in the bad debt protection.

Related Calculators

Factoring Cost Calculator – Calculate Total factoring cost