The short answer
Manufacturing factoring is usually priced per 30 days an invoice is unpaid. Large invoices to creditworthy customers can price as low as about 0.5% to 1% for the first 30 days, while smaller manufacturers or riskier customers commonly see 1.5% to 3%. Advances usually run from 80% to 95% of the invoice.
On a $75,000 invoice on net 60 terms at 1.5% per 30 days, the fee is $2,250, or 3% of the invoice. In exchange, $63,750 arrives within a day or two of shipping instead of two months later.
Manufacturing invoices are larger and terms are longer than in most industries, so the number of periods you pay is as important as the rate. A customer that stretches net 60 to 75 days adds a full period to every invoice.
What manufacturing factoring costs, line by line
| Cost item | Typical range | How it works |
|---|---|---|
| Factoring rate | about 0.5% to 3% per 30 days | Lower for large, diversified customer bases |
| Advance rate | 80% to 95% | Share of the invoice paid at verification |
| Reserve | 5% to 20% | Released when the customer pays, minus the fee |
| Setup and audit fees | one-time or periodic, varies | Larger facilities may include field exams |
| Credit insurance or non-recourse premium | added points, varies | When the factor takes the customer's credit risk |
| Transfer fees | small per transfer | ACH or wire |
| Monthly minimum | varies; common on larger facilities | A charge if volume falls below a floor |
These are typical quotes, not offers. Each factor prices after reviewing your customers, invoices and volume.
Why manufacturing often prices lower
Bigger invoices. A factor's work per invoice is similar whether the invoice is $2,000 or $200,000, so larger tickets earn lower percentages.
Established customers. Many manufacturers sell to large distributors, OEMs and retailers with long payment records, which lowers the risk the factor is pricing.
Predictable volume. Recurring orders make cash flow easier for the factor to underwrite than one-off project work.
The offsetting factors are long terms and concentration. Net 60 to net 90 is common, and a manufacturer with one customer making up half its sales will see a lower advance or a higher rate.
A worked example
A contract manufacturer ships a $75,000 order to an industrial distributor on net 60 terms. The factor advances 85% and charges 1.5% per 30 days, with any part of a period counted as a full one. The customer pays on day 60.
| Step | Amount |
|---|---|
| Invoice | $75,000 |
| Advance paid after shipment is verified (85%) | $63,750 |
| Reserve held back (15%) | $11,250 |
| Factoring fee (1.5% × 2 periods) | $2,250 |
| Reserve released when the customer pays | $9,000 |
| Total received | $72,750 |
If the distributor pays on day 65, the fee becomes three periods, or $3,375. If the same manufacturer factors $300,000 of invoices a month on these terms, the fees come to about $9,000 a month at two periods each. At that size, it is worth comparing factoring with an asset-based line of credit, which can cost less once your books support it.
Run your own numbers
The calculator below starts with the example above. Enter your typical invoice, the advance and rate from your quote, and the days your customers actually take to pay.
Your results
- Cash today (advance)
- $63,750.00
- Reserve held back
- $11,250.00
- Total cost (factoring fee)
- $2,250.00 (3% of invoice)
- Rebate when your customer pays
- $9,000.00
Fee periods charged: 2.
Estimates only. Actual rates and advances are set by each factoring company.
What drives your rate
Customer credit. The factor is pricing your customers' ability to pay. Invoices to large, rated companies earn the lowest rates.
Payment terms and real payment times. Net 30 invoices cost one period; net 90 invoices cost three. Customers who pay late add periods.
Concentration. If one customer is a large share of your receivables, expect a concentration limit, a lower advance on that customer, or a higher rate.
Volume and facility size. Higher monthly volume generally lowers the rate. Larger facilities may require minimums, audits and a longer contract.
Dilution. Returns, quality credits and pricing disputes reduce what customers pay. A history of credits leads factors to hold a larger reserve.
Other lenders. If a bank or inventory lender already has a lien on your receivables, the factor will need an agreement with that lender, which can slow setup. Factoring paired with inventory or purchase order financing is common in manufacturing; see the PO financing guide for how that works.
Fees outside the rate
Larger manufacturing facilities often come with costs that small-invoice programs do not have:
- Field exams or audits, where the factor reviews your books and customer records, sometimes annually.
- Unused line or minimum volume fees if you factor less than the facility assumes.
- New customer credit checks each time you add a buyer.
- Wire and lockbox charges for receiving customer payments.
These can be modest on a large facility, but on a smaller one they can add a meaningful share to the total. Get them in writing before signing, and model the cost at your slowest month, not your busiest.
Factoring and other financing for manufacturers
Factoring is one of several ways manufacturers fund working capital, and it is often used alongside others:
- Asset-based lending uses receivables, inventory and sometimes equipment as collateral for a revolving line. It usually costs less than factoring once your books support it, but it requires stronger financial reporting.
- Purchase order financing pays your suppliers so you can fill a large order, and is typically repaid when the resulting invoice is factored.
- Inventory financing borrows against raw materials or finished goods, at advance rates well below those on receivables.
A common path is to start with factoring while sales grow quickly, then refinance into an asset-based line once revenue and reporting are steady.
How to compare quotes
- Ask each factor to price the same invoice at 30, 60 and 90 days.
- Confirm how partial periods are counted.
- Get every fee in writing, including audits, minimums and wire charges.
- Check concentration limits for your largest customers.
- Compare the full annual cost against a bank or asset-based line if your volume is large.
The manufacturing factoring hub lists factors that work with manufacturers, or use Get a Quote below. For a view across all industries, see what invoice factoring costs.
Frequently asked questions
What is a normal factoring rate for a manufacturer?
Most quotes fall between about 0.5% and 3% per 30 days. Manufacturers with large invoices, strong customers and steady volume land at the low end, while smaller shops or riskier customers pay more.
How much will a factor advance against manufacturing invoices?
Typically 80% to 95%. Customers that take frequent credits or account for a large share of your sales usually get a lower advance.
Is factoring cheaper than a bank line of credit for manufacturers?
Usually not on rate alone. A bank or asset-based line often costs less once you qualify. Factoring is easier to get, grows with sales, and depends on your customers' credit rather than your balance sheet.
Do net 60 and net 90 terms make factoring expensive?
They increase the total fee because you pay for each period the invoice is open. A 1.5% per 30 days rate costs about 3% on net 60 and 4.5% on net 90.
Can I factor only some of my customers?
Often yes. Many factors allow selective or spot factoring of certain customers or invoices, usually at a somewhat higher rate than a full program.