Invoice factoring quotes can look cheap — "1.5% per 30 days" sounds tiny next to a loan rate — until you add up the reserve holdback, the monthly minimum, the wire fees, and what happens when a customer pays on day 75 instead of day 30. This guide breaks down every component of factoring pricing, shows you the real math at 30, 60, and 90 days, and gives you a checklist for comparing quotes on equal footing.
How factoring pricing actually works
Invoice factoring is the sale of your Accounts Receivable (AR) at a discount — not a loan. Per the Federal Reserve's March 2025 overview of nonbank small business financing, the factor buys your unpaid B2B invoices, collects directly from your customers, keeps a portion as its fee, and remits the rest to you.
A typical transaction, as described by BDC, Canada's business development bank (page current as of September 2026), has three money movements:
- The advance. The factor wires you a percentage of the invoice face value — the Advance Rate.
- The reserve. The factor withholds the rest of the invoice value as a Reserve until your customer pays.
- The rebate. When the customer pays, the factor releases the reserve to you, minus the discount fee and any other charges.
BDC notes that advance rates, factoring rates, and fees all vary with the creditworthiness of your business and — critically — your customers, the volume of receivables, and industry risk. The factor is underwriting the people who owe you money, which is why factoring can work for younger businesses with strong customers. If you're new to the product, start with our complete invoice factoring guide.
The main cost components, defined
| Component | What it is | How it's typically quoted |
|---|---|---|
| Discount fee (factoring fee) | The factor's core charge for buying the invoice | % of invoice face value, often per 30 days or in tiers (e.g., a rate for days 1–30, a higher cumulative rate for 31–60) |
| Advance rate | Cash you receive up front | % of face value; the rest sits in reserve |
| Reserve | Withheld portion released after customer payment, net of fees | % of face value (100% minus the advance rate) |
| Due diligence / setup fee | Underwriting, UCC searches, account setup | Flat fee at onboarding |
| Monthly minimum | Fee charged if you factor less than a committed volume | Dollar minimum or minimum fee amount per month |
| Wire / ACH fees | Cost of moving money to you | Flat per-transfer fee (wires usually cost more than ACH) |
| Processing / invoice fees | Per-invoice or per-schedule administration | Small flat fee per invoice or batch |
| Aging / late surcharge | Extra cost when invoices pay slowly | Higher tiered discount fee, or a daily rate after a threshold |
| Concentration surcharge | Risk pricing when one customer dominates your AR | Higher rate or lower advance on concentrated accounts |
| Termination fee | Cost to exit a contract with a term commitment | Flat fee or % of facility size |
The IRS Factoring of Receivables Audit Technique Guide similarly identifies the discount, administration fees, and commissions as standard components of factoring compensation — so a quote that only mentions the headline discount rate is incomplete by definition. Ask for the full fee schedule in writing.
Worked example: the same invoice at 30, 60, and 90 days
The numbers below are illustrative — there is no published standard for factoring pricing, and your quotes will differ. Assume a $100,000 invoice, an 85% advance rate, and a tiered discount fee of 1.5% of face value per 30-day period, plus a $30 wire fee.
Day 1 — funding:
- Advance: 85% × $100,000 = $85,000 (minus $30 wire = $84,970 received)
- Reserve held: $15,000
Scenario A — customer pays on day 30:
- Discount fee: 1.5% × $100,000 = $1,500
- Reserve rebate: $15,000 − $1,500 = $13,500
- Total cost: $1,530 (fee + wire) — about 1.53% of face value
Scenario B — customer pays on day 60:
- Discount fee: 3.0% × $100,000 = $3,000
- Reserve rebate: $12,000
- Total cost: $3,030 — about 3.03% of face value
Scenario C — customer pays on day 90:
- Discount fee: 4.5% × $100,000 = $4,500
- Reserve rebate: $10,500
- Total cost: $4,530 — about 4.53% of face value
Same invoice, same contract — the discount fee triples, and total cost rises from $1,530 to $4,530 because of your customer's payment speed. Before signing, pull an Aging Report and price your actual invoice mix and collection timings, not just the headline rate.
▦Estimate your invoice factoring paymentsRun the numbers in the invoice factoring estimator →▸You can also model your own numbers with our invoice factoring calculator.
Why headline factoring rates are not APRs
The Federal Reserve's March 2025 analysis notes that factoring offers, like merchant cash advances, typically are not expressed as an interest rate or APR, and consumer Truth in Lending disclosure standards don't apply to small business financing. The Fed also flagged how misleading rate-style numbers can be in this market: one advertised factor rate of 1.15 (in an MCA-style context, not necessarily factoring) equated to an estimated APR of roughly 70% (source). Our guide to factor rate vs. APR walks through that translation in detail.
Some states have stepped in: California, New York, Utah, and Virginia have commercial financing disclosure laws requiring cost disclosures, which the CFPB determined in March 2023 are not preempted by TILA. Whether a specific factoring transaction is covered varies by state and deal structure, so don't assume you'll get a standardized disclosure.
The practical comparison method:
- Normalize the quote. Convert every offer to total dollars of cost on a $100,000 invoice paid at your median DSO (say, 47 days).
- Add every fee. Setup fees amortized over expected volume, wire fees per funding, monthly minimums if your volume dips, processing fees per invoice.
- Stress-test slow payers. Re-run the math at your 75th-percentile payment timeline. Some tiered structures get expensive fast after day 60.
- Check the exit. Contract length, termination fees, and whether the factor takes a UCC Lien (UCC-1 Filing) on all your receivables (most do).
What drives your rate up or down
| Factor | Cheaper pricing | More expensive pricing |
|---|---|---|
| Customer credit | Large, creditworthy debtors with clean payment history | Small or unrated customers, disputes, past charge-offs |
| Recourse structure | Recourse (you keep nonpayment risk) | Non-recourse (factor absorbs insolvency risk) |
| Volume | Higher committed monthly volume | Spot factoring of single invoices |
| Payment speed | Net 30 customers who pay on time | Net 60/90 terms, chronic slow payers |
| Concentration | Diversified customer base | One customer = most of your AR |
| Industry | Established, low-dispute industries | High-dispute or progress-billing work |
| Invoice quality | Clean, verified, delivered goods/services | Pre-billing, milestone billing, offsets |
On recourse: the IRS ATG confirms that in Non-Recourse Factoring the factor bears the loss when a customer can't pay due to financial inability, while in Recourse Factoring that risk stays with you — a core reason non-recourse costs more. But read the fine print: non-recourse protection usually covers insolvency only, not quality disputes or short-pays. We compare the structures in recourse vs. non-recourse factoring.
Quote-comparison checklist
Bring this list to every factor you talk to, and get answers in writing:
- Discount fee structure: flat, tiered, or daily? Where do the tier breakpoints fall?
- Advance rate — and does it drop for concentrated or aged accounts?
- Recourse or non-recourse, and exactly what triggers recourse (nonpayment at 90 days? disputes?)
- Setup/due-diligence fee, and any annual facility renewal fee
- Monthly minimum volume or minimum fee — and what happens in a slow month
- Per-wire, per-ACH, and per-invoice processing fees
- Contract length, auto-renewal terms, and termination fee
- Whether all invoices must be factored, or you can select which ones (spot factoring)
- Reserve release timing after customer payment
- Notification mechanics — how the factor communicates with your customers
Note that factoring (where customers pay the factor directly) differs from Invoice Financing, where you keep collecting and borrow against invoices — the SBA outlines the distinction here. Pricing structures differ too, so compare like with like.
Where EQ Funding fits
Because factoring pricing is negotiated deal by deal, competition is your best cost-control tool. EQ Funding is a financing marketplace, not a lender: one application reaches a network of factors and lenders across the US and Canada that compete for your business, so you can put quotes side by side instead of taking the first offer. Factors and lenders assess your customers' credit, your receivables, and your business profile, and approval and terms vary by provider. If factoring turns out to be the wrong fit — say your margins can't absorb the fees — the same application can surface alternatives like a business line of credit or revenue-based financing.