Invoice Factoring Calculator

On these figures the facility costs £10,610.96 a year, about £884.25 a month. That is 2.65% of turnover, but 20.71% of the £51,232.87 of funding you actually use. The second figure is the one to compare against other ways of funding the gap.

Average unpaid invoices are annual turnover multiplied by debtor days and divided by 365. The advance rate applied to that figure gives the funding typically outstanding, and the rest is the retention released when the customer pays.

The service fee is charged on turnover, or as a fixed annual amount, with any minimum fee applied when the calculated fee falls short. The discount charge applies to the funds advanced rather than to turnover, because it is the cost of money borrowed.

Setup, renewal, audit, transfer and bad debt protection charges are added as entered, and the total is shown both as a share of turnover and as a share of average funding.

A steady flow of invoices through the year, all eligible for funding, with no concentration limits, disapprovals, recourse claims or refactoring charges. The indicative rate is an annual cost of average funding, not an APR, and providers quote in different ways, so use it as a comparison rather than a quotation.

Invoice finance advances a share of an unpaid invoice as soon as you raise it, with the balance released when the customer pays. It solves a timing problem rather than a profit problem, which is why it suits businesses growing faster than their cash collects.

The cost is made up of a service fee for running the facility and a finance charge on the money advanced. The longer your customers take to pay, the more funding is outstanding and the higher the charge, so the cost of factoring and the cost of slow payment are linked. If invoices are simply overdue, check what you can charge with the late payment interest calculator before funding the gap.

Before committing, compare the monthly cost with the cash position you are trying to fix, using the cash flow runway calculator, and check the effect on margins with the margin calculator.

£250,000 turnover, 45 day payment

Average debtors are £30,821.92 and an 85% advance releases £26,198.63. A 2% service fee costs £5,000.00 and the 9% discount rate on the funds advanced costs £2,357.88, giving £7,357.88 a year, or 28.08% of the funding used.

Small facility with a minimum fee

On £120,000 of turnover a 1.5% service fee would be £1,800, but a £4,800 minimum applies, adding £3,000.00. The total becomes £6,378.08, which is 40.42% of the £15,780.82 advanced. Minimum fees hit small facilities hardest.

£900,000 turnover on longer terms

Slower payment at 70 days pushes average funding to £155,342.47. Even at a lower 0.8% service fee, the facility costs £20,350.69 a year, showing how debtor days drive cost as much as the rates quoted.