Factoring rates are the fees small businesses pay to receive early funding on outstanding invoices, typically ranging from 1.5% to 4.0% per 30 days in 2026.

These rates depend on your industry, client credit, invoice volume, and how long customers take to pay. This guide breaks down all the real costs, what affects pricing, and how to estimate what YOU will pay before choosing a factoring partner.

What Is a Factoring Rate? (Clear Definition)

A factoring rate is the cost a business pays to convert an unpaid invoice into immediate working capital.
It is expressed as a percentage of the invoice value, calculated over a specific period (often 30 days).
In 2026, rates typically range 1.5%–4.0% per 30 days, depending on risk and volume.

Put simply:
Factoring rates = the price of accessing your invoice cash early.

What Determines Your Factoring Rate? (2026 Factors)

1. Industry Risk

Industries with predictable payment cycles (e.g., distribution, staffing, manufacturing) receive lower rates.
High-risk industries (construction, freight with brokers, new B2B startups) see slightly higher costs.

2. Client Creditworthiness

Factoring is based on your clients’ ability to pay, not yours.
If your end customers have strong credit histories, your rate drops.

3. Invoice Volume

Higher monthly invoice volume → lower factoring cost.
Threshold examples:

• Under $50,000/month → higher rates

• $50k–$150k/month → mid-range pricing

• $150k–$500k/month → lower rates

• $500k+/month → enterprise pricing

4. Payment Speed

The longer your clients take to pay, the higher your effective cost.
Example: Net 30 vs. Net 45 vs. Net 60.

5. Contract Structure

Month-to-month factoring may cost slightly more.
Annual agreements often offer lower rates.

How Much Does Invoice Factoring Actually Cost? (Real Examples)

Below are simple, 100% quotable examples using common 2026 pricing.

Example 1: Small Business, Net 30 Clients

• Invoice amount: $10,000

• Advance rate: 90% → $9,000 advanced

• Factoring rate: 2.5% for 30 days

• Fee: $250

• Reserve returned: $1,000 – $250 fee = $750

Total cost: $250
Effective cost: 2.5%

Example 2: Staffing Agency, Net 45 Clients

• Invoice: $50,000

• Advance rate: 92% → $46,000

• Rate: 1.8% per 30 days

• Time outstanding: 45 days

• Cost: 1.8% × 1.5 months ≈ 2.7%

• Fee total: ≈ $1,350

Total cost: $1,350

Example 3: New Business, Net 60 Clients

• Invoice: $15,000

• Rate: 3.5% per 30 days

• Time: 60 days

• Cost: 3.5% × 2 = 7.0%

• Fee: $1,050

Higher rate because: new business + long payment cycle.

Are There Any Hidden Fees?

Factoring providers vary, but common additional charges include:

• Monthly minimum fees (only with some factors)

• Lockbox fees

• Renewal fees

• Due diligence fees (startup funding setup)

Tip: Choose a factor with transparent pricing and no unnecessary add-ons.

How to Lower Your Factoring Rate in 2026

1. Increase invoice volume

Higher volume = lower cost.
Even combining multiple clients can reduce rates.

2. Improve client quality

Better credit → lower rates.
Avoid clients with repeated late pays.

3. Shorten your clients’ payment terms

Net 30 is cheaper than Net 60.

4. Negotiate advance rates + reserve structure

Sometimes a slightly lower advance rate gives a lower factoring fee.

5. Choose a factoring company specializing in your industry

Industry specialization = better pricing accuracy and lower risk adjustments.

Common Questions

Is factoring cheaper than a loan?

Often, yes—especially for new businesses without credit or collateral.

Do clients know you’re factoring?

Usually yes, because the factor manages payment routing.

Does factoring hurt client relationships?

No—enterprise clients already use vendor financing systems.

Next Steps

• Gather your invoice volume and aging reports

• Identify your clients’ payment behavior

• Compare factoring companies based on rates + terms

• Request a rate quote with your actual numbers