The short answer
A factor buys your invoice, advances most of its face value now, and keeps a fee when your customer pays. The fee is the "discount" or "factoring rate," quoted as a percentage of the invoice. Among the factoring companies we have profiled that publish a figure, the ranges run from under 1% to around 5% of the invoice, with most quoted rates landing between 1% and 3% (altLINE — Invoice factoring rates explained, Summar Financial — FAQ, Charter Capital — Factoring cost). What you actually pay depends on how the fee is structured, how long your customer takes to pay, and which add-on charges sit in the contract.
If you run a trucking company, the numbers are more specific and the structures differ; our freight factoring cost guide covers that. This page is for everyone else: staffing, manufacturing, construction and other business-to-business companies that invoice on terms.
Three ways the fee is quoted
The same 2% can mean very different totals depending on the structure. Ask which of these you are being offered.
Flat rate. One percentage of the invoice, charged once, regardless of how long the customer takes to pay (within the factor's limit, often 60 to 90 days). Simple, predictable, and usually the right structure for customers who pay slowly. BasicBlock, for example, advertises a flat fee of 2.5% or less for carriers (BasicBlock — Freight factoring).
Tiered or incremental rate. A starting percentage for the first period, then an added increment for each further period the invoice stays open: 1% for the first 30 days plus 0.5% for every 10 days after, for instance. Universal Funding publishes its pricing this way, 0.55% to 2% for the first 30 days (Universal Funding — Factoring rates). Tiered pricing is cheaper than a flat rate if your customers pay fast and more expensive if they do not.
Prime-plus. Larger facilities are sometimes priced like a loan: an interest charge on the advanced amount at a margin over the prime rate, plus a smaller service fee on each invoice. This is common with bank-owned factors and facilities in the high six figures and up. It behaves like a line of credit with the receivable as collateral, so it rewards speed of collection exactly as a tiered rate does.
A monthly structure deserves one more note. FundThrough, for example, prices at 1.9% to 2.9% per 30 days for receivables under $1 million (FundThrough — Pricing). "Per 30 days" is a tiered rate in different clothing: a 60-day invoice costs double.
What moves your rate
Factors price risk and effort. Five things set where you land in the range:
- Monthly volume. Bigger volume means lower rates, because the factor's fixed work per client is spread across more dollars. Factors say so: Triumph's rates "are based on the amount and volume of your loads" (Triumph — Factoring).
- Invoice size. A $50,000 invoice costs the factor about the same effort to verify and collect as a $500 invoice. Small-ticket work gets a higher percentage.
- Your customers' credit. The factor is lending against your customer's promise to pay, not yours. Large, creditworthy customers earn lower rates; thin or unrated customers earn higher ones, or get declined.
- Days to pay. With tiered or monthly pricing, every extra period adds to the fee. Even with a flat rate, factors price the limit they expect to wait.
- Recourse. Non-recourse factoring, where the factor absorbs a loss if your customer goes bankrupt, costs more than recourse factoring. Our recourse decision guide covers when that premium is worth paying.
The advance and the reserve
The advance rate is the share of the invoice the factor pays you up front. Published advances among the factors we profile run from about 70% to 100%: Bay View Funding says 70% to 90% (Bay View Funding — FAQ), Liquid Capital typically 80% to 85% (Liquid Capital — Five foundations of factoring costs), Charter Capital typically 90% and up to 98% (Charter Capital — Factoring cost), and 1st Commercial Credit 75% to 98% depending on industry (1st Commercial Credit — FAQ).
The rest is the reserve. When your customer pays, the factor releases the reserve minus the fee. The advance rate is not a cost, but it matters for cash flow: an 80% advance on a $20,000 invoice leaves $4,000 you cannot spend until the customer pays. Industries with disputes, chargebacks and retainage, construction in particular, get lower advances because the factor expects deductions.
The fees beyond the rate
This is where two offers with the same headline rate diverge. Ask for a written schedule of every charge. The usual ones:
| Fee | What it is | What to ask |
|---|---|---|
| Origination or setup | One-time charge to open the facility | Is it waived at a volume threshold? |
| Monthly minimum | A fee charged if your factored volume falls short of a floor | Is there one at all? Several factors publish no minimums |
| Invoice processing | A per-invoice or per-schedule charge | Flat per invoice, or per batch? |
| ACH or wire | Charge per funding transfer | Is ACH free and wire extra, or both charged? |
| Credit check | Charge to approve a new customer | Per customer, or included? |
| Lockbox or collateral management | Monthly charge for handling customer payments | Is it a percentage or a fixed amount? |
| Termination or early exit | Charge to leave before the term ends | What is the notice period and buyout? |
| Misdirected payment | Charge when a customer pays you instead of the factor | How much, and is there a grace period? |
Some factors publish that they charge none of these. Phoenix Capital Group's FAQ, for example, describes a month-to-month agreement with no setup, termination or invoice-processing fees (Phoenix Capital Group — FAQ), and Liquid Capital says no auto-renewal or exit fees (Liquid Capital — FAQ). Treat those statements as something to confirm in the contract, not a substitute for reading it. Our hidden fees guide goes through each one in more detail.
A worked example
Say you are a staffing agency with a $40,000 invoice on net-30 terms, and the factor offers a 90% advance at 1.5% for the first 30 days plus 0.5% for each 10 days after.
- Advance: 90% of $40,000 = $36,000 wired to you.
- Reserve: $4,000 held by the factor.
- Customer pays on day 30: fee is 1.5% of $40,000 = $600. The factor releases $4,000 minus $600 = $3,400. Total received: $39,400. Cost: $600.
- Customer pays on day 50: fee is 1.5% plus two 0.5% increments = 2.5% of $40,000 = $1,000. Reserve released: $3,000. Total received: $39,000. Cost: $1,000.
Add a $25 wire fee per funding and a $150 monthly facility fee, and the day-50 invoice really cost $1,175, or 2.9% of its face value. That is the number to compare, not 1.5%.
Percentage versus annual cost
A 2.5% fee for 50 days of money is not a 2.5% annual rate. Scaled to a year, 2.5% over 50 days is roughly 18% annualized, and if the fee is charged on the full invoice while you only received 90% of it, the cost against the cash you actually used is higher still. The factoring calculator does that arithmetic for any invoice, fee and payment date.
That comparison is also the honest way to weigh factoring against a bank line, which is quoted as an annual rate. Our factoring vs. line of credit guide walks through it. The annualized figure looks high; what it buys is money in days rather than weeks and approval based on your customers' credit rather than your balance sheet.
What the factors we profile publish
Most factoring companies do not publish a rate at all. Of the 40 largest factors we have profiled, fewer than half publish a fee range on their own sites, and the ones that do usually print a floor ("from 0.4%", "as low as 1%") rather than a typical figure. The published floors we found: Viva Capital from 0.25% (Viva Capital), Porter Capital from 0.4% (Porter Capital), Bay View Funding from 0.5% (Bay View Funding — FAQ), American Receivable from 0.8% (American Receivable), and 1st Commercial Credit 0.69% to 4% with an average client around 2.25% (1st Commercial Credit — Invoice factoring).
A floor tells you the best case for the largest, lowest-risk client. Your quote will sit above it. The useful signal is whether a factor publishes anything at all; the ones that do tend to be easier to pin down on every other fee too. Our best factoring companies for small businesses list ranks on exactly that kind of transparency.
How to compare two offers
- Ask for the fee structure in writing: flat, tiered or prime-plus, with the day counts.
- Ask for the full fee schedule, including the monthly minimum and the termination terms.
- Take two of your real invoices, one from a fast payer and one from a slow payer, and run both offers through the calculator.
- Compare the advance rate and what triggers a lower one (disputes, concentration, aged invoices).
- Check the contract length and notice period. A cheap rate with a one-year term and an exit fee can cost more than a slightly higher month-to-month rate.
If you would rather start from a shortlist, the get-matched wizard takes your industry, state and monthly volume and shows the profiled factors that fit, with what each one publishes. We connect you with a factor; the factor quotes your terms, and we are paid by factors for introductions, never by you.
Frequently asked questions
Is factoring more expensive than a bank loan?
Measured as an annual rate, usually yes. A 2% fee on a 30-day invoice is roughly 24% annualized, well above a bank line. Measured as dollars, the comparison depends on how much of the money you actually needed and for how long, and factoring is often available when a bank line is not: approval rests on your customers' credit, and funding arrives in a day or two rather than weeks.
Does a higher advance rate mean a higher fee?
Not directly. The advance rate is how much you receive now; the fee is what the factor keeps. Some factors pair a 100%-less-fee advance with a higher percentage because they carry more exposure, while others advance 80% at a lower rate. Compare total dollars received on a real invoice rather than either number alone.
Why does my quote differ from the rate on the factor's website?
Published rates are floors or ranges for the factor's best-fitting clients. Your quote reflects your volume, your invoice sizes, your customers' credit and whether you want recourse or non-recourse. Ask the factor which of those pushed your rate above the floor, since some, like volume, change over time.
Are there factors with no monthly minimum?
Yes. Among the factors we profile, several publish no monthly minimums on their own sites, including American Receivable, Riviera Finance, Apex Capital and Liquid Capital. Our no-minimum list ranks them. A factor that publishes a minimum, such as Universal Funding's $25,000 a month, is not wrong for you; it just means a small or seasonal book will pay a fee it would not pay elsewhere.