Invoice factoring calculator, 2026/27

How this is calculated

Invoice factoring advances a percentage of each invoice, typically 80-90%, as soon as it is raised, with the finance company then collecting payment directly from your customer and releasing the remaining balance, less charges, once paid. This calculator applies the advance rate to monthly invoiced sales to show the immediate cash released, then works out the factoring fee on invoice value and a discount charge on the funds actually advanced.

The factoring fee covers the sales ledger management and credit control the finance company takes on, and is usually charged as a percentage of turnover regardless of how quickly customers pay. The discount charge behaves like interest on an overdraft, calculated on the cash drawn down and the number of days it is outstanding, so slow-paying customers increase the cost.

Annualising the monthly cost gives a rough total facility cost for the year, which is the figure most useful when comparing factoring against a bank loan, an overdraft or invoice discounting for the same amount of cash released.

When factoring suits a company

Factoring is often used by younger or fast-growing businesses that lack the in-house credit control resource to chase payment themselves, or that want the finance company's credit checking on new customers as part of the service. It can also be a route to finance for a company that would not yet qualify for a confidential discounting facility.

Because collections are handled by the factor, customers know a finance arrangement is in place, which some businesses are comfortable with and others prefer to avoid, particularly where customer relationships are sensitive.

Weighing the cost against the benefit

The combined factoring fee and discount charge can look expensive next to a low-rate bank loan, but the comparison needs to include what the company saves on credit control staff time and bad debt protection if a non-recourse facility is used, as well as the value of turning sales into cash immediately rather than waiting 30-90 days.

For companies growing quickly, the ability to fund the growing sales ledger without waiting for customers to pay is often worth more than the headline percentage cost, provided margins are healthy enough to absorb the fee.

How is invoice factoring different from a bank overdraft?

An overdraft is a general facility secured on the business as a whole, usually with a fixed limit. Factoring is secured specifically against your unpaid invoices and grows automatically as your sales grow, which suits businesses whose main asset is a growing sales ledger.

Who deals with my customers if I use factoring?

The finance company takes over invoicing, statements and chasing payment, usually under your trading name but with customers aware a factor is involved, since payment is typically made to the factor's own bank account.

What is recourse versus non-recourse factoring?

Recourse factoring means your company remains liable if a customer never pays. Non-recourse factoring includes bad debt protection, so the factor absorbs the loss on approved invoices that are not paid, usually at a higher fee.

Is invoice factoring suitable for a very small company?

It can be, but minimum turnover requirements and set-up costs mean it is usually better value once monthly invoiced sales reach a reasonable scale. Smaller or occasional cash needs are often better served by a short-term loan or overdraft.