Factoring is selling an invoice for cash now. The factor advances most of the invoice today, keeps a fee when the broker pays, and releases the rest. Enter the fee, advance rate and payment terms from your quote and this page shows the cost in dollars, as a share of the invoice, and annualized so you can compare it with other ways of bridging the gap.

Freight Factoring Cost Calculator

Enter the terms of a factoring quote and see what being paid today costs: the fee in dollars, the cash advanced now, the reserve released when the broker pays, the cost as a share of the invoice, and the same fee annualized so you can compare it with other ways of bridging the gap.

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Thinking about factoring your loads?

The figure above is the price of being paid today instead of in the days you entered. If that trade is worth it for your cash flow, Porter can quote your actual rate, and you can put that rate back into this calculator.

How a factoring fee works, and when it comes out

A factoring company buys your invoice. It pays you a share of the face value today, called the advance, and holds the rest, called the reserve. When the broker pays the factor, the factor takes its fee out of the reserve and sends you what is left. On a $2,500 invoice at a 3% fee and a 90% advance, that is $2,250 today, a $75 fee, and $175 later. You receive $2,425 in total, and the $75 is the price of having $2,250 now instead of $2,500 in a month.

Some factors take the fee out of the advance instead of the reserve. The totals are identical; the difference is which day the fee leaves your hands. This calculator uses the reserve model and tells you when the fees are larger than the reserve, in which case they come out of the advance.

Advance and reserve

Factoring fee = invoice × the fee percent from your quote.
Total cost = factoring fee + flat fees per invoice.
Advanced today = invoice × the advance percent.
Reserve released = invoice − advance − total cost, paid when the broker pays.
Total you receive = invoice − total cost. Always equal to advance plus reserve.

Flat versus tiered schedules, and what recourse changes

A flat schedule charges one percentage no matter how long the broker takes to pay. A tiered schedule starts lower and steps up as the invoice ages, so the same load costs more when a slow broker is on the other end. Enter the tier you expect to land in, or run the calculator twice. Recourse changes who eats a broker that never pays: under recourse it is you, under non-recourse it is the factor, and the non-recourse fee is higher for that reason. Whichever kind you are quoted, the rate you type here already includes it.

The fees people miss

ACH and wire charges, invoice processing fees, per-invoice minimums that turn a small invoice into an expensive one, monthly minimum volume charges when you factor less than you agreed to, reserve holds that keep your money for weeks after the broker has paid, and early termination charges that make leaving expensive. Put the per-invoice ones into the flat fees field. The rest are terms, not arithmetic, and belong in the questions you ask before you sign.

The annualized figure, and why it is not an APR

A 3% fee to wait 30 days and a 3% fee to wait 7 days are not the same price. The annualized figure puts both on one scale: what the fee would add up to if you factored the same invoice at the same fee every time for a year. At 30 days, 3% on a 90% advance annualizes to about 41%. At 7 days it is about 174%. Factoring is a sale, not a loan, so this is a comparison figure and not an interest disclosure, and it assumes you would factor every invoice all year, which most carriers do not.

When factoring is worth it, and when it is not

Factoring earns its fee when the cash it moves forward lets you take a load you could not otherwise fuel, or keeps a payment from going late. It costs you the fee for nothing when the invoice was about to pay anyway, when the broker offers a quick-pay program at a lower discount, or when a short payment term makes the annualized figure enormous. Invoice size matters too: a $25 flat fee is 1% of a $2,500 invoice and 5% of a $500 one. Run the numbers per load, and run them again when your quote changes.

Worked examples

A typical dry-van invoice You pay $75.00 (3.00% of the invoice) to have $2,250.00 today instead of $2,500.00 in 30 days; the other $175.00 comes when the broker pays.
A larger invoice with a wire fee, at monthly volume You pay $215.00 (2.69% of the invoice) to have $7,600.00 today instead of $8,000.00 in 45 days; the other $185.00 comes when the broker pays. At $40,000.00 of invoices a month, that is about $1,075.00 a month.
A short-dated invoice: the same rate, a far higher annualized cost You pay $36.00 (3.00% of the invoice) to have $1,080.00 today instead of $1,200.00 in 7 days; the other $84.00 comes when the broker pays.

Factoring cost questions, answered

What does freight factoring cost?: A percentage of each invoice, plus whatever flat fees the agreement adds. The percentage is the factoring fee, and it is set by your quote, not by this page. On a $2,500 invoice a 3% fee is $75. Flat fees for ACH or wire transfers, invoice processing and per-invoice minimums sit on top, and they weigh far more on a small invoice than on a large one.
Is the factoring fee an interest rate?: No. Factoring is the sale of an invoice, not a loan, so the fee is a discount on the sale rather than interest on a balance. The annualized figure on this page shows what the fee would add up to if you factored the same invoice at the same fee every time for a year. It exists so you can compare the cost with other ways of covering the gap, and it is not an APR disclosure.
What is the reserve, and when do I get it?: The reserve is the part of the invoice the factor does not advance up front. When the broker pays the factor, the factor keeps its fee and any flat fees and releases the rest of the reserve to you. Many agreements hold the reserve for a period after the broker pays to cover disputes, and that hold is a term of your agreement rather than something this calculator models.
What is the difference between recourse and non-recourse factoring?: Under a recourse agreement you owe the advance back if the broker never pays. Under a non-recourse agreement the factor absorbs that loss, usually for a higher fee and usually with conditions about why the broker did not pay. The rate you type into this page already reflects whichever kind your quote is, so ask your factor which one you are being quoted before you compare offers.
Does factoring make sense for every load?: No. The same 3% fee costs very different amounts of time. On an invoice that would have paid in 30 days it is one thing; on one that would have paid in 7 days the annualized figure is several times higher, because you paid the same fee to move the money a much shorter distance. Run the numbers per load, and check whether the broker offers a quick-pay program before you factor an invoice that is about to pay anyway.