What does invoice factoring cost?

Factoring fees typically run 1 to 5 percent of invoice face value per 30 days outstanding. Where a company lands in that range is driven by monthly volume, customer credit quality, invoice size, and industry dilution rates. The quoted rate is only part of the cost: float days, monthly minimums, and ancillary fees can move the true annualized cost meaningfully, which is why the fee schedule matters more than the headline number.

What advance rate should I expect?

Commonly 70 to 95 percent of invoice face value. Staffing and professional-services invoices typically advance at 90 to 92 percent; manufacturing and distribution at 80 to 90 percent; progress-billed construction at 70 to 80 percent; and healthcare insurance receivables at 70 to 85 percent of expected net collections. The driver is dilution — how reliably invoices in your industry pay at face value.

No. Factoring is the sale of an asset — your receivable — at a discount. Nothing amortizes and there is no fixed repayment schedule; the transaction settles when your customer pays the invoice. That is why approval depends on your customers’ credit rather than primarily on yours, and why availability grows automatically as billing grows.

Will my customers know I am factoring?

Yes. A notice of assignment directs your customers to remit payment to the factor, and verification means the factor may confirm invoices with them. In staffing, transportation, and much of distribution this is completely routine. If customer perception is a genuine concern, asset-based lending keeps collections in your name and is worth evaluating instead.

What is the difference between recourse and non-recourse factoring?

Under recourse factoring, invoices unpaid past a defined aging — commonly 90 days — are charged back to you. Non-recourse shifts defined customer credit risk, usually formal insolvency only, to the factor at a higher fee. Non-recourse does not cover disputes, short-pays, or slow payment, so it is narrower protection than the name implies.

Can I factor if I have a bank loan or an existing UCC lien?

Often, but it has to be structured. A factor needs first position on the receivables it purchases, so an existing blanket lien requires either a subordination or intercreditor agreement from the incumbent lender, or a payoff at funding. This is one of the most common points where deals stall, and resolving it early is one of the more useful things an advisor does.

How fast can a factoring facility be set up?

Initial funding commonly takes several business days to two weeks from complete documentation, driven mostly by invoice verification and lien work rather than credit review. After setup, individual invoices typically fund within 24 to 48 hours of submission.

Capital solution

Invoice factoring: working capital built from receivables you have already earned.

Factoring converts unpaid B2B invoices into cash within a day or two of billing, sized to your sales rather than your balance sheet. It suits companies whose customers pay on net 30 to net 90 terms while payroll and suppliers will not wait.

Reviewed by Ryan Hurley, Co-Founder & CEO

Invoice factoring is the sale of accounts receivable to a funding company at a discount. The factor advances a percentage of each invoice — commonly 70 to 95 percent depending on industry — when you bill, collects from your customer, and releases the remainder minus a fee when the invoice pays. Approval rests on your customers’ credit quality, not primarily on yours.

Good fit

B2B invoices on terms

Creditworthy commercial or institutional customers paying on net 30 to net 90, with clean, verifiable invoices for delivered work or goods.

Tradeoff

Your customers will know

Factoring involves a notice of assignment directing customer payments to the factor. That is normal in many industries and a genuine consideration in others.

Review

Fee structure over headline rate

Two facilities quoting the same rate can differ meaningfully in true cost once float days, minimums, and ancillary fees are counted. The fee anatomy below shows what to check.

Mechanics

How a factoring facility actually moves money.

Factoring is a purchase of receivables, not a loan, and the mechanics follow from that. Once a facility is in place, the cycle on each invoice looks like this.

You deliver and invoice. The work is complete or the goods are accepted. Factors fund earned receivables, not progress estimates or pre-billing.
The invoice is verified. The factor confirms with your customer that the invoice is valid and undisputed. On established accounts this becomes routine sampling rather than every invoice.
The advance funds. Typically within 24 to 48 hours, the factor wires the advance — the agreed percentage of face value — and holds the remainder in reserve.
Your customer pays the factor. Under the notice of assignment, payment goes to a lockbox or account the factor controls. Your customer’s process barely changes; only the remit-to address does.
The reserve releases. When the invoice pays, the factor deducts its fee and releases the rest of the reserve to you.

Because funding scales with billing, a factoring facility grows automatically with revenue — which is why fast-growing companies that keep outrunning a fixed line of credit often find factoring the less restrictive instrument, despite the higher unit cost.

The numbers most providers make you call to get

Typical advance rates and what actually drives them.

Advance rates are set by how reliably an industry’s invoices pay at face value. Invoices that get shorted — by contractual adjustments, chargebacks, or disputes — carry lower advances because the factor’s collateral is worth less than its face amount. These are typical market ranges we observe across funding partners; any specific facility depends on the profile reviewed.

Typical factoring advance rates by industry (market ranges, subject to underwriting)
Industry	Typical advance	What moves it
Staffing & professional services	90–92%	Time-sheet-verified invoices with low dilution; see staffing factoring
Manufacturing & distribution	80–90%	Returns, rebates, and chargeback history against invoices
Business services	85–90%	Contract clarity and dispute history
Construction (progress-billed)	70–80%	Retainage, lien rights, and pay-when-paid clauses complicate collection; see construction factoring
Healthcare (insurance receivables)	70–85%	Advances are set against expected net collections, not gross billings

Fees typically run 1 to 5 percent of invoice value per 30 days outstanding, with the low end reached at higher monthly volumes and stronger customer credit. The quoted rate, however, is only part of the true cost. The items that separate a fair facility from an expensive one are usually in the schedule of fees, not the headline.

Float days. Some factors charge fees through the day payment is received; others add several “clearance days” after receipt. Three extra float days on every invoice is a real rate increase that never appears in the quote.
Monthly minimums. A commitment to factor a minimum volume, charged whether you bill it or not. Reasonable at modest levels; punitive if your revenue is seasonal.
Tiered vs. flat fees. A flat 3 percent regardless of payment speed rewards slow payers; a tiered structure (for example, 1 percent per 10 days) rewards fast ones. Which is cheaper depends entirely on how your customers actually pay.
Ancillary charges. Origination, lockbox, wire, credit-check, and same-day-funding fees. Individually small, collectively material.
Termination and notice provisions. The exit cost matters, because well-run companies eventually graduate to cheaper structures.

Run any quote through the capital cost calculator to see the annualized cost against your actual payment cycle before signing.

Compare quotes before you sign one

Bring us a factoring quote and we will read the fee schedule with you.

We place receivables facilities across multiple funding partners, so we see how the same book of invoices prices in different hands. Fifteen minutes is usually enough to tell whether a quote is competitive and which terms to negotiate.

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Direct line, weekdays. Nothing to prepare, and no documents needed for the conversation.

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Underwriting

What a factor is actually underwriting: your customers, your dilution, your concentration.

Factoring approval is largely indifferent to the things that decide a bank loan. Losses, limited operating history, and a leveraged balance sheet are rarely fatal. What decides the facility is the quality of the receivables themselves, measured three ways.

Customer credit. Repayment comes from your customers paying their invoices, so the factor underwrites them more closely than you. A book of invoices to established companies, municipalities, or hospital systems prices well; a book of invoices to thinly capitalized startups does not.
Dilution. The percentage of invoice face value that historically does not collect — credits, disputes, chargebacks, short-pays. Dilution above roughly 5 percent starts pushing advances down; sustained double-digit dilution can kill a deal outright.
Concentration. One customer representing most of your receivables concentrates the factor’s risk in a single payer. Facilities can still be structured around concentration, but expect caps or pricing adjustments above roughly 30–40 percent in one name.

Most facilities are recourse: if an invoice goes unpaid past a defined aging (commonly 90 days), you buy it back or replace it. Non-recourse facilities shift defined credit risk — usually customer insolvency only, not disputes — to the factor, at a higher fee. Non-recourse is narrower protection than the name suggests, and it is worth being precise about which risks actually transfer before paying for it.

Documentation

What underwriting asks for, in the order it is asked.

Accounts receivable aging, current, with customer names.
Accounts payable aging, to see who else has claims on your cash.
Sample invoices with the backup that supports them (time sheets, delivery confirmations, contracts).
Customer list with concentration percentages and payment terms.
Articles of organization and a UCC search — existing blanket liens must be addressed before a factor can take first position on receivables.
Recent bank statements and financials, mostly to confirm nothing contradicts the above.

Where it sits

Factoring against the alternatives.

Invoice factoring — receivables sold as you bill. Scales with revenue, fastest to establish, highest unit cost of the receivables options.
Asset-based lending — a revolving facility secured by receivables and inventory together, with you keeping collections. Cheaper at scale; the natural graduation once monthly volume and reporting discipline support it. The factoring vs. ABL comparison works through the decision.
Purchase order financing — funds the stage before a receivable exists. Large orders often use PO financing into factoring in sequence.
Line of credit — cheaper when available, but sized to your balance sheet rather than your sales, and slower to grow with you.

The pattern we see repeatedly: companies factor through their steep growth years, build clean receivables reporting as a byproduct, and refinance into an asset-based facility once volume justifies it. A $3.2M inventory and receivables facility for a $45M distributor shows the destination; how staffing agency invoicing works shows how billing mechanics set the advance rate at the start.

Questions we are asked

Invoice factoring, answered directly.

What does invoice factoring cost?: Factoring fees typically run 1 to 5 percent of invoice face value per 30 days outstanding. Where a company lands in that range is driven by monthly volume, customer credit quality, invoice size, and industry dilution rates. The quoted rate is only part of the cost: float days, monthly minimums, and ancillary fees can move the true annualized cost meaningfully, which is why the fee schedule matters more than the headline number.
What advance rate should I expect?: Commonly 70 to 95 percent of invoice face value. Staffing and professional-services invoices typically advance at 90 to 92 percent; manufacturing and distribution at 80 to 90 percent; progress-billed construction at 70 to 80 percent; and healthcare insurance receivables at 70 to 85 percent of expected net collections. The driver is dilution — how reliably invoices in your industry pay at face value.
Is factoring a loan?: No. Factoring is the sale of an asset — your receivable — at a discount. Nothing amortizes and there is no fixed repayment schedule; the transaction settles when your customer pays the invoice. That is why approval depends on your customers’ credit rather than primarily on yours, and why availability grows automatically as billing grows.
Will my customers know I am factoring?: Yes. A notice of assignment directs your customers to remit payment to the factor, and verification means the factor may confirm invoices with them. In staffing, transportation, and much of distribution this is completely routine. If customer perception is a genuine concern, asset-based lending keeps collections in your name and is worth evaluating instead.
What is the difference between recourse and non-recourse factoring?: Under recourse factoring, invoices unpaid past a defined aging — commonly 90 days — are charged back to you. Non-recourse shifts defined customer credit risk, usually formal insolvency only, to the factor at a higher fee. Non-recourse does not cover disputes, short-pays, or slow payment, so it is narrower protection than the name implies.
Can I factor if I have a bank loan or an existing UCC lien?: Often, but it has to be structured. A factor needs first position on the receivables it purchases, so an existing blanket lien requires either a subordination or intercreditor agreement from the incumbent lender, or a payoff at funding. This is one of the most common points where deals stall, and resolving it early is one of the more useful things an advisor does.
How fast can a factoring facility be set up?: Initial funding commonly takes several business days to two weeks from complete documentation, driven mostly by invoice verification and lien work rather than credit review. After setup, individual invoices typically fund within 24 to 48 hours of submission.

Get a receivables facility structured around how you actually bill.

We evaluate your customer base, dilution, and concentration first — then match the facility and negotiate the fee schedule.

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