Invoice Factoring Calculator

Invoice factoring is a form of business finance where a factoring company advances you 70-90% of your invoice value immediately, then collects payment from your customers. When the customer pays, you receive the remaining balance minus fees. The factoring company manages your sales ledger and credit control. It differs from invoice discounting, where your customers are unaware of the arrangement.

Typical costs include: a service fee of 0.75-2.5% of turnover (covers credit control and administration), and a discount charge of 1.5-3.5% above base rate on the amount advanced (like interest). On £100,000 monthly turnover, total costs are typically £2,000-£5,000 per month. Larger businesses with good debtor books get lower rates.

Advance rates typically range from 70-90% of invoice value. The rate depends on your industry, customer creditworthiness, and the age of invoices. Industries with high dispute rates (construction, recruitment) get lower advances. Blue-chip customer invoices may qualify for up to 90% advance. The retained percentage is released when the customer pays, minus fees.

Factoring suits businesses with: B2B invoices on 30-90 day payment terms, cash flow constraints, growth funding needs, and limited access to traditional bank lending. It is particularly popular in recruitment, manufacturing, distribution, and professional services. It is less suitable for businesses with few large customers, high dispute rates, or consumer sales.

Factoring includes credit control — the factor collects payments from your customers, who know about the arrangement. Invoice discounting is confidential — you continue to collect payments yourself, and customers are unaware. Discounting is typically available to larger, more established businesses and costs slightly less than factoring.