Freight factoring cost and APR calculator

How freight factoring pricing works

A factor buys your invoice and pays most of it up front. That first payment is the advance, set by the advance rate. The rest is the reserve: the factor holds it until the broker or shipper pays, then releases it minus its fees. The guide to advance rate and reserve walks through more examples.

The main charge is the factoring fee (also called the discount), a percentage of the invoice's face value. Some factors charge one flat rate however long the debtor takes. Others use a schedule tiered by days to pay, or a base rate for the first 30 days plus an increment for each extra period. Some add per-invoice, transfer or monthly minimum fees on top. Freight factoring rates covers how quotes are built.

The APR formula, worked through

The calculator annualizes what you pay for the cash you get early: effective APR = (total fees ÷ advance funded) × (365 ÷ days to pay). Here it is on a $2,500 invoice at a 95% advance and a 3% flat fee, with a broker that pays in 30 days.

1. 1

   Advance funded

   $2,500 × 95% = $2,375 paid to you at funding. The reserve is the other $125.

2. 2

   Total fees

   3% of the $2,500 face value is $75. There are no other fees in this example.

3. 3

   Cost for the period

   $75 ÷ $2,375 = 3.158% for 30 days of money.

4. 4

   Annualize it

   365 ÷ 30 = 12.167, and 3.158% × 12.167 = 38.42%. That's the effective APR.

5. 5

   Reserve and net

   When the broker pays, the factor keeps the $75 from the $125 reserve and releases $50. You net $2,425.

This is a simple annualized rate, not compounded. Factors usually don't quote an APR, because factoring is structured as a purchase of invoices rather than a loan, so treat the number as a way to compare offers, not as a lending disclosure.

Why APR matters when you compare quotes

A percentage fee looks small because it's quoted per invoice, not per year. The same 3% at a 95% advance annualizes to about 76.8% on a broker that pays in 15 days, and about 19.2% on one that pays in 60. Days to pay matters as much as the rate.

Two quotes are only comparable on the same invoice, the same days to pay and every fee each factor charges. A lower headline rate with a lower advance, a per-invoice fee or a monthly minimum can cost more than a higher flat rate. The advance rate moves the APR too: a lower advance gives you less cash for the same fee.

Recourse vs non-recourse

With recourse factoring, if the debtor doesn't pay, you buy the invoice back or the factor charges it against your reserve. With non-recourse, the factor takes on part of that risk, usually only the debtor failing to pay for credit reasons such as insolvency, and charges more for it. Disputes, short pays and fraud are typically excluded, so read the contract's definition before you pay the premium. See what non-recourse factoring doesn't cover.

Enter the premium a factor quotes in the non-recourse field to see what it costs per load and what it does to the APR.

Fees to ask about before you sign

• The full fee schedule in writing: flat or tiered, and what you're charged after the last tier.
• Whether the fee is charged on the invoice face value or on the advance. This calculator assumes face value.
• Per-invoice, processing or verification fees.
• ACH, wire or fuel card transfer fees, and whether same-day funding costs extra.
• Monthly minimums, and what you owe if you factor less than the minimum.
• When the reserve is released, and whether it can be held against other invoices.
• Credit check fees for new brokers and shippers.
• Termination fees, notice periods and automatic renewal.