How is factoring cost calculated?

Factoring cost = (discount fee % per 30 days × number of 30-day periods the invoice is outstanding) × invoice face value. Example: 2.5% per 30 days × 2 periods (60 days outstanding) × $100,000 invoice = $5,000 cost. Annualized APR equivalent = (cost / invoice face) ÷ (days outstanding / 365) × 100. Same example: ($5,000 / $100,000) ÷ (60/365) × 100 ≈ 30% APR equivalent.

What's the typical factoring rate by industry?

April 2026 typical discount fee bands: Trucking 1.5–4.0% per 30 days (highly variable by shipper credit). Construction 1.5–3.5% per 30 days (lien-rights complexity). Oilfield services 1.5–3.5% (long aging cycle). Healthcare receivables 1.5–3.5% (denial reserve). Manufacturing 1.0–2.5%. Distribution 1.0–2.5%. Staffing 1.0–2.5% (Fortune 500 obligor mix). Government contractors 1.0–2.5% (Treasury obligor).

What's the effective APR equivalent on factoring?

12–48% APR equivalent depending on industry. Annualized math: a 2.0% per 30 days fee on a 60-day-aging invoice = 4.0% face cost over 60 days = 24.3% APR equivalent. The APR is high relative to a bank line of credit (8–11%) because factoring underwrites the obligor (not the borrower) and provides 24–48 hour funding speed. Companies factor when they can't qualify for a bank line OR when speed-of-funding matters more than cost.

How does the advance rate affect total cost?

Advance rate determines the immediate cash made available — but the discount fee is calculated against the FULL invoice face, not just the advance. A 90% advance vs. 75% advance changes the day-of-funding cash flow but doesn't change the per-invoice fee cost. Higher advance rates are valuable for cash-flow-tight companies; the trade-off is sometimes a slightly higher discount fee from the factor (compensating for higher exposure).

Free Working Capital Tool

B2B Factoring Cost Calculator

Day-of-funding advance, total fee, reserve release, and effective APR — across 8 industry presets. Pick your vertical, run your invoice, see the all-in cost before signing a factor agreement.

Your Invoice

Industry PresetInvoice Face Value

Advance Rate (%)

Discount Fee per 30 Days (%)

Days Outstanding (AR Aging)

days

Construction & Subcontractor typical: 75% advance · 2.50% per 30 days · 60 day aging.

Result

Day-of-Submission Advance

$75K

Total Discount Fee (2.00 × 30-day periods)

$5K

Reserve Released at Obligor Pay

$20K

Total Received (Advance + Reserve)

$95K

Effective Annualized APR

30.4%

Vs. bank LOC: 8–11% APR · Vs. ABL revolver: 11–18% APR

See the B2B Factoring Strategy →

Indicative cost only. Final pricing depends on obligor mix, monthly volume, contract length, and recourse election.

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Typical Factoring Specs by Industry

Industry	Advance Rate	Fee / 30 days	Typical Aging
Construction & Subcontractor	75%	2.50%	60 days
Staffing Agency	90%	1.75%	40 days
Trucking & Freight Broker	93%	2.50%	30 days
Oilfield Services	84%	2.50%	80 days
Manufacturing	80%	1.75%	55 days
Healthcare Receivables	67%	2.50%	90 days
Government Contractor	85%	1.75%	45 days
Distribution & Wholesale	84%	1.75%	42 days

April 2026 typical specs. Actual position in band depends on obligor credit mix, monthly volume committed, contract length, and recourse vs. non-recourse election. PeerSense pre-screens UCC-1 senior filings + IRS lien status + obligor concentration before lender submission.

How Factoring Cost Compounds

Factoring fees are charged per 30 days outstanding — not per invoice. A 2.5% per 30-day fee on a 60-day invoice = 5.0% face cost. The same 2.5% fee on a 30-day invoice = 2.5% face cost. AR aging is the biggest lever on factoring cost — pushing obligors to pay faster directly reduces the fee paid.

Industries with naturally long aging cycles (oilfield 60–105 days, healthcare 60–120 days) carry materially higher factoring cost than industries with short cycles (trucking 20–45 days, staffing 30–55 days). Worth modeling cost differently for each obligor: a Fortune 500 obligor that pays in 35 days costs less than a small private obligor that pays in 75 days, even at the same 2.0% per 30 days fee.

When to Graduate from Factoring to ABL

Above $5–10M average AR balance with diversified obligor mix and clean monthly reporting, ABL revolving credit lines typically price 200–600 bps tighter than transactional factoring. The graduation curve compounds — on $10M of average AR, a 400 bps reduction is $400K per year in interest savings. Compounded across 5+ years, it's a material P&L line.

PeerSense routes companies between factoring → ABL → bank LOC based on revenue trajectory, AR composition, customer concentration, and financial reporting maturity. We don't push companies into the cheapest product if they don't qualify yet — we route to the right step in the curve and build the path to the next graduation.

Ready to evaluate the right working capital structure for your AR?

PeerSense pre-screens UCC-1 senior filings, IRS lien status, MSA assignment clauses, and obligor concentration before any lender submission. Pre-cleared files close 7–14 days faster than raw inquiries.

Read the B2B Factoring Strategy