How Much Does Invoice Factoring Cost? Fees Explained With Real Numbers

Ask three factoring companies for a price and you may get three formats: a percentage per 30 days, a percentage per 10 or 15 days, or a starting rate that steps up the longer an invoice stays open. All three can be fair. None can be compared until you turn them into dollars on the same invoice, paid on the same day.

The Three Numbers in Every Factoring Deal

• The advance is the part of the invoice you receive up front, usually 80–90%. It’s your own money, paid early, so it doesn’t count as a cost.
• The reserve is the rest of the invoice, held until your customer pays. It’s also your money. You get it back, minus the fee.
• The fee is the cost. It’s calculated on the full invoice amount, depends mostly on how long your customer takes to pay, and comes out of the reserve.

So the only number that measures cost is the fee. A higher advance gives you more cash today. It doesn’t lower the cost.

A $100,000 Invoice at 30, 45 and 60 Days

This example uses the figures from our capital estimator for a staffing invoice. It’s hypothetical, not an offer. Your proposal states your own fee schedule.

The advance is the same whichever terms your customer pays on. What changes is the fee, and so the amount of reserve you get back. Run your own numbers in the estimator on our homepage or on the working capital page.

What Sets Your Fee

• How long your customers take to pay. This matters most. Each Sigma agreement sets a fee schedule by payment period, so a customer who pays in 30 days costs less than one who pays in 60.
• Your customers’ credit. Factors underwrite mainly on the businesses that owe you. Strong, established customers mean lower risk.
• Your industry. Industries differ in disputes, deductions and documentation. Our estimator uses different figures for staffing, manufacturing, distribution and freight.
• Your volume and invoice size. Larger, steadier volume spreads the cost of verification and collection over more invoices.

How Quote Formats Change the Price

Here’s why you can’t compare headline rates. Take two hypothetical quotes, neither of them Sigma’s, on a $100,000 invoice that the customer pays on day 52:

Quote A sounds cheaper and costs $1,000 more. The difference only shows when you price the invoice at the number of days your customers actually take.

To compare quotes fairly:

1. Pull your accounts receivable aging and find how many days your main customers actually take to pay.
2. Ask each factor for the total fee, in dollars, on one of your real invoices paid on that day.
3. Ask for every other charge in writing (see the next section).
4. Compare total dollars, not percentages.

Other Charges to Ask About

Many factors add charges beyond the main fee. Ask about each one before you sign.

What’s in your proposal is what you pay. No line items appear at closing that weren’t disclosed up front.

Is Factoring Worth the Cost?

Compare the fee to what the cash lets you do, not to zero.

• Margin on new work. A staffing agency with a 25% gross margin earns $25,000 of gross profit on a $100,000 invoice. Funding it at 45 days costs $3,525. If the agency couldn’t make payroll on the contract without funding, the fee buys $21,475 of profit it would otherwise turn down.
• Supplier discounts. A supplier offering 2% off for paying in 10 days instead of 30 saves you $2,000 on every $100,000 of purchases. Funding invoices to take that discount can pay for part of the fee.
• The cost of the alternatives. A merchant cash advance usually costs far more. A bank line of credit usually costs less, if you can qualify for one and live within its limit.

Factoring is the wrong tool if your margins are thin and your customers pay slowly. In that case, the fee can take most of the profit on the invoice.

Questions About Factoring Fees

Is the fee charged on the advance or the whole invoice?

On the full invoice amount, for the payment period in your fee schedule. The fee comes out of the reserve when your customer pays, so you don’t pay it up front. That’s why the fee in the table above is the same whether you’d take a higher or lower advance.

What if a customer pays later than expected?

The fee follows your schedule for the longer payment period, and Sigma releases the reserve once the payment clears. You don’t need to pay anything when the invoice is funded.

Can I see my exact pricing before I commit?

Yes. Within 48 hours of your request, you get a proposal with your advance, fee schedule and terms, and you don’t have to sign it.

Is a higher advance rate better?

It means more cash on day one, not lower cost. Two factors can advance different amounts and charge the same fee. Compare the fee in dollars, then decide how much of the invoice you need up front.

Does factoring cost more if I’m a new business?

What matters most is your customers’ credit and how long they take to pay. A new business with established customers can still qualify, and you can sign with $0 in sales.