The method
How it is worked out
Cost = advance × discount rate × days ÷ 365 + invoice × service fee + fixed fees
- advance
- Invoice × advance rate, paid up front
- discount rate
- Annual rate charged on the advance while outstanding
Invoice Factoring Cost Calculator
Price an invoice-finance offer: advance rate, discount fee, service fee and what it costs against waiting or a loan. The result updates as you type so you can compare scenarios quickly.
Keep in mind
What it leaves out
- RecourseWith recourse you repay if the customer defaults.
- Minimum periodsSome facilities charge a minimum number of days.
- Whole-turnover dealsSelective factoring costs more per invoice than a whole-ledger facility.
Use the calculator to compare scenarios rather than as a guaranteed forecast.
About the Invoice Factoring Cost Calculator
Price an invoice-finance offer properly: the advance you receive today, the discount charge while the invoice is outstanding, the service fee and what it all costs against your profit on the job.
How it works and an example to tryShow less
How to use the result
The advance is the invoice times the advance rate. The discount charge is the advance times the annual discount rate, pro-rated for the days outstanding. The service fee is a percentage of the invoice. Total cost is annualised and compared with your gross profit on the invoice.
Example to try
A £50,000 invoice with an 85% advance, 9% discount rate over 60 days and a 1.5% service fee costs about £1,380: 2.8% of the invoice, an annualised 19%, and 9% of a 30% gross margin.
Put it to work
Try it on a real situation
Load an example
What moves the result most
Worked out from your figures above. Tap a row to try it.
Who uses it, and when
Contractors, agencies, wholesalers and manufacturers with long payment terms, and anyone weighing factoring against an overdraft or an early-payment discount.
Mistakes worth avoiding
- Comparing the discount rate with a loan rate without annualising it.
- Forgetting the service fee, which often costs more than the discount.
- Factoring every invoice when only the slow payers need it.
Questions
What does the Invoice Factoring Cost Calculator do?
Price an invoice-finance offer: advance rate, discount fee, service fee and what it costs against waiting or a loan.
How should I use the result?
The advance is the invoice times the advance rate. The discount charge is the advance times the annual discount rate, pro-rated for the days outstanding. The service fee is a percentage of the invoice. Total cost is annualised and compared with your gross profit on the invoice.
Does TechBullion store the information I enter?
The core calculation or transformation runs in your browser. Normal website security and analytics may still record page-level events, but the tool does not need to create a public record from your inputs.
What mistakes do people make with an invoice factoring cost calculator?
Comparing the discount rate with a loan rate without annualising it. Forgetting the service fee, which often costs more than the discount. Factoring every invoice when only the slow payers need it.
Is the result guaranteed?
No. Use the result as a practical check or planning aid and verify important decisions with the relevant primary source, provider or professional advice.
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Results are estimates based on the figures entered, for general information only, and not financial, investment, tax or legal advice. See our terms of use.