Small Business

Invoice Factoring Calculator

Estimate advance cash, fees, reserve held back, and effective cost of invoice factoring.

Advance = invoice × advance rate; fee = invoice × fee rate

What this calculator does

Estimate advance, reserve, and a one-time fee stated as a percentage of invoice face value; fee timing depends on the contract.

Scope, period, and currency

This page runs a local formula from user-entered values. The country/currency selector changes money symbols and formatting only: it does not perform live or historical FX conversion or automatically change contract, tax, accounting, or regulatory rules. Convert all amounts into one currency first and keep periods and metric definitions consistent.

Formula variables

I: Invoice face amount.
a: Advance rate as a decimal from 0 to 1.
f: One-time factoring fee rate as a decimal from 0 to 1.

Formula and worked example

Formula: Advance = I × a; fee = I × f; reserve = I − advance; eventual net proceeds = I − fee.

Recalculation: $50,000 invoice, 85% advance, 3% fee: advance $42,500; reserve $7,500; fee $1,500; eventual net proceeds $48,500. Immediate cash is $41,000 only if the fee is deducted upfront; otherwise it may be $42,500.

Model assumptions

The fee is charged once on invoice face value.
The invoice is fully collected and no other fees, dilution, recourse loss, or time-based charges apply.
The model does not determine when the fee is deducted.

Reading the result and model boundary

Separate total economics from the timing of initial advance and reserve release.
Compare contracts using all fees, collection days, recourse, and effective financing cost.

This is a face-value, one-fee model, not an effective annual financing-cost or accounting analysis.

How to use it

Enter invoice amount and rates between 0% and 100%.
Confirm whether the fee is deducted upfront or from the reserve.
Add time-based fees and contract deductions outside this simple model.

Common incorrect uses

Assuming every provider deducts fees upfront.
Entering rates above 100%.
Ignoring collection time, recourse, minimum fees, and reserve adjustments.

Suggested verification workflow

Map the contract cash-flow timeline.
Calculate advance, reserve, and fee.
Reconcile with the provider's settlement statement.

FAQ

Is the fee always deducted from the first advance?

No. Contracts may deduct it upfront or from the reserve; check the settlement terms.

Does this calculate an annualized cost?

No. There is no financing-duration input.

Does currency selection convert the invoice?

No. It changes formatting only; all amounts must use one currency.

Method and review boundary

Results are calculated locally in the browser from the formula shown on this page. The tool does not retrieve live rates, quotes, approvals, or billing data. Last reviewed: July 24, 2026.

Use the result for first-pass estimates, scenario comparison, and question preparation; it is not financial, investment, tax, accounting, or legal advice.

Authoritative sources and notes

Accounts receivable financing handbook - Office of the Comptroller of the Currency
IFRS 9 Financial Instruments - IFRS Foundation

Sources checked July 24, 2026. Rates, product rules, and official guidance can change; verify them again before a formal decision.