This calculator helps you compare two factoring proposals based on the advance rate and the factoring rate. This approach is useful because the lowest quoted rate is not always the lowest-cost option once the advance rate is considered.
Table 1: Transaction Assumptions
Enter the invoice amount and factoring period used for both options. The factoring period is the number of days covered by the quoted factoring rate. For example, if the rate is 3.15% per 30 days, enter 30.
| Invoice Amount | $ |
| Factoring Period (Days) |
Table 2 – Factoring Proposal Terms
Enter the rate per period and advance rate for each factoring option. The rate per period is the factoring fee charged for the period entered in Table 1. The advance rate is the percentage of the invoice amount the factoring company advances upfront.
Table 3: Cost per Dollar Advanced Comparison
This table shows the calculated advance amount, factoring fee, and cost per dollar advanced for each option. Use the cost per dollar advanced to compare the true cost of each proposal after accounting for both the rate and the advance rate.
| Item | Option A | Option B |
|---|---|---|
| Advance Amount | $ 80,000 | $ 90,000 |
| Factoring Fee | $ 2,150 | $ 3,150 |
| Cost per Dollar Advanced | $ 0.0269 | $ 0.0350 |
Use this calculator only when both options use the same factoring period. Comparing rates with different periods can be complicated because each factoring company may calculate fees differently.
Note: This calculator is for educational purposes only and not intended as financial advice. Please consult a professional if you require financial advice.
Marco Terry is the Managing Director of Commercial Capital LLC and has over two decades of experience in asset-based finance. He has worked with small and mid-sized companies across the United States, Canada, and Australia. Marco holds a Master of Science in Finance.