Typical Factoring Costs
Recourse Factoring
1-3%
Per invoice
Non-Recourse Factoring
3-6%
Per invoice
Spot Factoring
3-5%
Per invoice
What's Included in the Fee?
The factoring fee covers more than just access to cash. You're paying for a complete financial service:
Immediate Cash Advance
Receive 80-95% of your invoice value within 24 hours, eliminating the 30-90 day wait for payment.
Credit Checks on Customers
Factor runs credit reports on your customers to assess risk, helping you avoid bad debt.
Invoice Management
Factor tracks invoices, manages accounts receivable, and provides detailed reporting.
Collections Services
Factor handles payment reminders and collections, saving you time and discomfort.
Credit Protection (Non-Recourse)
With non-recourse factoring, protection against customer bankruptcy and insolvency.
Online Portal Access
24/7 access to submit invoices, track funding, and manage your account.
Get Your Custom Rate Quote
Rates vary by business—see what you qualify for
What Affects Your Factoring Rate?
Your specific rate depends on several factors. Understanding these helps you negotiate better terms:
1. Your Customers' Creditworthiness
Biggest factor in determining your rate. Factors are primarily concerned with whether your customers will pay.
Lower Rates (1-2%)
- • Fortune 500 companies
- • Government agencies
- • Strong credit ratings (A+ to A)
- • Proven payment history
Higher Rates (4-6%)
- • New or unknown customers
- • Startups without credit history
- • Fair to poor credit ratings
- • History of slow payments
2. Invoice Volume
Higher monthly volume typically earns lower rates as factors benefit from economies of scale.
| Monthly Volume | Typical Rate Range |
|---|---|
| Under $50,000 | 3-5% |
| $50,000 - $100,000 | 2.5-4% |
| $100,000 - $250,000 | 2-3% |
| Over $250,000 | 1.5-2.5% |
3. Your Industry
Some industries carry more risk than others, affecting rates and availability.
Lower-Risk Industries
- • Trucking/Transportation
- • Staffing Agencies
- • Manufacturing
- • Professional Services
Higher-Risk Industries
- • Construction (mechanic's liens)
- • Oil & Gas
- • Government Contractors
- • Startups in any industry
4. Payment Terms Length
Longer payment terms mean the factor's money is tied up longer, increasing their risk and your cost.
- Net 15-30 days:Standard rates
- Net 45-60 days:+0.5-1% higher
- Net 90+ days:+1-2% higher
5. Other Factors
Lower Rates:
- • Whole ledger factoring
- • Long-term contracts
- • Clean invoice history
- • Few customer disputes
- • Recourse factoring
Higher Rates:
- • Spot factoring (selective)
- • Short-term arrangements
- • Past payment issues
- • Frequent disputes
- • Non-recourse factoring
Average Rates by Industry
| Industry | Typical Rate Range | Advance Rate | Notes |
|---|---|---|---|
| Trucking/Freight | 1.5-3% | 90-95% | Very common, well-established |
| Staffing Agencies | 1.5-3% | 85-90% | High volume, predictable |
| Manufacturing | 2-4% | 80-85% | Varies by customer type |
| Wholesale/Distribution | 2-3.5% | 80-90% | Depends on inventory risk |
| Professional Services | 2-4% | 80-90% | Quality of clients matters |
| Construction | 3-5% | 75-85% | Lien risk increases cost |
| Textiles/Apparel | 2.5-4% | 75-85% | Returns risk affects rate |
| Government Contractors | 2-4% | 80-90% | Slower payment cycle |
See Your Exact Rate
Get a personalized quote based on your business
Watch Out for Hidden Fees
While the factoring fee is the main cost, some factors charge additional fees. Always ask about these:
Application/Setup Fee
Typical Range: $0 - $500 (one-time)
Some factors charge to set up your account. Many waive this for qualified businesses.
Due Diligence Fee
Typical Range: $0 - $1,000 (one-time)
Covers cost of credit checks and customer verification. Often included in the factoring fee.
Monthly Minimum Fee
Typical Range: $0 - $500/month
Some contracts require minimum monthly volume. If you don't hit it, you pay a fee.
Wire Transfer Fee
Typical Range: $10 - $35 per wire
For same-day funding. ACH transfers are usually free but take 1-2 days.
Termination Fee
Typical Range: $0 - $5,000
Some contracts have early termination fees. Look for month-to-month agreements when possible.
ACH/Processing Fees
Typical Range: $0 - $10 per transaction
Small fees for processing payments. Most factors don't charge these.
Pro Tip: Ask for the All-In Cost
When comparing factors, ask "What's my total cost per month including all fees?" This gives you an accurate comparison. A 2% factoring fee with $500 in monthly fees might cost more than 2.5% with no extra fees.
Calculating the True Cost
Here's how to calculate what factoring actually costs you, including some helpful perspectives:
Example Calculation
Scenario: $100,000 monthly invoices, 3% fee, Net 45 terms
Monthly cost: $100,000 × 3% = $3,000
Annual cost: $3,000 × 12 = $36,000
Percentage of annual revenue: 3% of $1.2M = 3%
Alternative Ways to Think About the Cost:
- As APR: 3% for 45 days ≈ 24% APR (sounds high, but you're also getting services)
- Per day: $3,000 ÷ 30 days = $100/day for access to $90,000 in cash
- Opportunity cost: Can you make more than $3,000/month with $90,000 in working capital?
Is Factoring Worth the Cost?
Consider these questions:
- Can you take on more work? If factoring lets you accept an additional $50K project, paying $1,500 in fees is worthwhile.
- Can you negotiate discounts? If paying suppliers early saves 2% on a $40K order, that's $800 saved (offsetting factoring fees).
- What's your alternative? Compare to credit card interest (18-25%), MCA rates (40-200%), or the cost of turning down work.
- What's your time worth? Not chasing payments and managing collections has value too.
How to Negotiate Better Rates
Before You Start
- Work with creditworthy customers
- Have clean, professional invoices
- Demonstrate higher monthly volume
- Get quotes from multiple factors
- Consider whole-ledger over spot
After 6-12 Months
- Request rate review based on clean history
- Negotiate if volume has increased
- Shop competing offers
- Ask for loyalty discounts
- Request higher advance rate