Guide
How much does invoice factoring cost?
Invoice factoring commonly costs between about 1% and 5% of the invoice value per 30 days outstanding, though pricing varies widely by provider, invoice volume, customer credit quality and how long invoices take to be paid. The fee is only part of the cost; advance rate, reserve, minimums and add-on charges all change the effective price.
By Truidian · Updated
The main ways factors charge
Most factors charge a discount (or factor) fee as a percentage of the invoice. It is usually structured one of two ways, and comparing them requires converting both to the same basis.
- Flat fee: one percentage charged regardless of how long the invoice takes to pay, often with a cap on days.
- Tiered or time-based fee: a lower percentage for the first period, then an additional percentage for each additional period (for example, every 10 or 30 days) until the customer pays.
A worked example
Suppose you factor a $10,000 invoice with a 90% advance and a 3% fee for the first 30 days. You receive $9,000 up front. If the customer pays at day 30, the factor keeps its $300 fee and releases the remaining $700 reserve, so you net $9,700. If the customer takes 60 days and the provider adds another 3% for the second period, the fee becomes $600 and you net $9,400.
That shows why slow-paying customers raise the cost. The same invoice, on the same contract, can cost twice as much depending on collection time.
Charges that change the real price
Ask any provider to list these in writing before you sign.
- Application, setup or due-diligence fees
- Monthly minimum volume requirements and shortfall fees
- ACH, wire or same-day funding fees
- Credit-check fees on new customers
- Early-termination or contract-length penalties
- Whether fees are calculated on the invoice face value or on the amount advanced
FAQ
Common questions.
What is a typical factoring advance rate?
Many factors advance roughly 80% to 95% of an invoice’s face value up front. The remainder, called the reserve, is released after the customer pays, less the factor’s fees.
Is recourse or non-recourse factoring cheaper?
Recourse factoring is usually cheaper because you keep the risk if a customer never pays. Non-recourse shifts some of that credit risk to the factor and usually costs more, and it often covers only specific non-payment events such as customer insolvency.
How can I compare two factoring quotes?
Convert both to the total dollars you would net on the same sample invoice at the same payment timing, including every extra fee. A lower headline rate can cost more once minimums and add-on fees are included.
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Truidian is a business solutions company, not a lender, factoring company or payment processor. Services are offered by participating third-party providers and are subject to their approval and terms. Figures shown are general ranges, not offers or quotes. This content is general information, not legal, tax, accounting or financial advice.