Cash up front
$0
- Factorable amount (after retainage)
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- Total fee
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- You receive in total
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- Fee as % of invoice
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- Effective annual rate
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Illustrative only. Not an offer of credit, a quote or financial advice. Lenders and contractors set real prices and rates.
Cost by days outstanding
| Customer pays in | Fee | Fee % of invoice | Effective annual rate |
|---|
How to use the factoring calculator
- Enter the invoice and the retainage percentage on the job; most factors exclude retainage from the advance, so the calculator advances against the invoice net of it.
- Enter the factor's terms: advance rate, the fee for the first period (often 30 days), and the fee per additional increment (often per 10 or 15 days). These come from the factor's quote; ask for them in writing.
- Enter the days until your customer actually pays, not the invoice terms. A net-30 GC that pays in 55 days costs you the 55-day fee.
- Add other fees (setup, wire, per-invoice processing) to see the real total.
Reading the results
The effective annual rate is the number most quotes hide. A 2.5% fee for 30 days sounds small; on money you had for 30 days it's about 30% annualized on the advance, and higher if fees stack. That's not a reason to avoid factoring; it's a reason to compare it with a line of credit for recurring gaps and to use it where speed and credit coverage matter more than cost. The table shows how the fee climbs the longer the customer takes, which is why factoring suits reliable-but-slow payers, not disputed invoices.
Worked example
A $60,000 progress invoice with 10% retainage factored at an 85% advance, 2.5% for 30 days plus 1% per 10 days: $54,000 is factorable, $45,900 arrives up front, and if the GC pays in 60 days the fee is about $2,970 (5.5% of the factorable amount), roughly 39% annualized on the cash advanced. If the GC pays in 30 days the fee drops to $1,350. Our guide to how construction invoice factoring works walks through the full process, and the construction invoice factoring page covers recourse, lien waivers and how to compare factors.
What the calculator leaves out
- Recourse vs non-recourse terms and what happens on a dispute.
- Monthly minimums and termination fees in a factoring contract.
- Whether your subcontract's pay-when-paid clause affects the factor's willingness to buy the invoice.
- The alternative cost of a line of credit or working capital loan, which the comparison on those pages covers.
Frequently asked questions
How is a factoring fee calculated?
Usually as a percentage of the invoice (or the factorable amount after retainage) for the first period, often 30 days, plus a smaller percentage for each additional increment the invoice stays unpaid. Some factors use flat rates or tiered schedules; ask for the exact terms.
What is a typical factoring rate?
Commonly quoted in the range of 1% to 5% per 30 days depending on volume, customer credit and industry. Construction tends to sit higher than general B2B because of retainage and dispute risk.
What is the effective APR of factoring?
Because the fee is charged on money you hold for only weeks, the annualized cost is far higher than the headline percentage: a 2.5% fee for 30 days on the advance is roughly 30% annualized. The calculator shows this for your numbers.
Can I factor retainage?
Usually not. Most factors exclude retainage because it isn't due until closeout and may be reduced by disputes. The calculator removes it from the advance for that reason.
Is factoring cheaper than a loan?
Per dollar, a line of credit is usually cheaper if you qualify. Factoring wins on speed, on approval based on your customer's credit rather than yours, and when you only need to bridge occasional invoices.
Sources and further reading
Primary sources we rely on for this page. Program rules change, so check the source before you rely on a figure.