How Does an Invoice Factoring Calculator Work?

How Does an Invoice Factoring Calculator Work?

An invoice factoring calculator reveals how much working capital can be unlocked immediately by factoring instead of waiting for customers to pay.

Using an Invoice Factoring Calculator to Estimate Unlocked Working Capital

Using an Invoice Factoring Calculator to Estimate Unlocked Working CapitalAs one of the first receivables financing companies to have an invoice factoring calculator on their website, we know how valuable it can be for those comparing the fees, advances and other contract details invoice factoring companies propose. Since the top goal of companies that factor customer receivables is usually to speed up cash flow, this is one of the first estimates you’ll see when you generate results.

Opportunity Cost Calculator

Use our invoice factoring calculator to determine whether factoring receivables could expedite cash flow in your business.

  • Your Current Total Accounts Receivable
    $1,000 $5,000,000+
    $0
  • Your Average Customer Invoice Amount
    $0 $250,000+
    $0
  • Advance Rate for Factored Invoices (Advances usually range from 85-98%)
    85% 98%
    0%
  • Factoring Fee (Factoring fee usually ranges from 1-5%)
    1% 5%
    0.50%

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  • Expedite working capital tied up in customer invoices, without waiting for customers to pay Working Capital Unlocked $0
  • Average Factoring Fee $0

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For instance, let’s say your company’s current outstanding accounts receivable are $80,000. If you factored all of the invoices, you could expedite cash flow by unlocking up to $80k immediately, instead of waiting for customers to pay.

If your customers generally take 30 or more days to pay, gaining access to this working capital immediately enables you to reinvest in business operations more quickly. It also helps to align incoming revenues more closely with outgoing expenses, which can reduce stress and help to ensure you have enough working capital to pay employees, vendors, suppliers and still take on new business without having to wait for customers to pay.

Waiting on customer payments can slow business growth. For this reason, invoice factoring calculators are often referred to as opportunity cost calculators. Unlocking working capital by factoring may enable you to take advantage of more business opportunities, whereas waiting on customers payments might mean you have to pass on some opportunities. So “opportunity cost” refers to any opportunities your business can’t take advantage of because it’s not using receivables financing to speed up cash flow.

Using an Invoice Factoring Calculator to Compare Factoring Rates and Advances

The second estimate an invoice factoring calculator shows is the advance rate. When you factor an invoice, the advance rate is a percentage amount that is immediately “advanced” to your organization. For instance, from the example above, let’s say that your current accounts receivable are $80k, your average invoice amount is about $12,000 and your advance rate is 96%.

When you factor an invoice in the amount of $12k, you immediately gain access to 96% of the invoice amount, or $11,520. The remainder of $480 is allocated to what is called a “reserve” and the factoring fee (also sometimes called a factoring rate), which is the third estimate provided by our invoice factoring calculator.

The factoring fee is a one-time fee charged for factoring a customer invoice, and it’s usually represented as a percentage (such as 1%) of the invoice amount. As in the example above, with $80,000 in outstanding receivables, let’s say that your average invoice is about $12,000. You unlock the $12k immediately instead of waiting on a customer payment by factoring the invoice with us, gaining immediate access to 96% of the invoice amount – or $11,520.  Your all-in cost of factoring that invoice with us is $120. The remainder – $360 – is the amount allocated to the reserve. Once the invoice you factored has been paid in full, that $360 is also returned to your company.

Using an Invoice Factoring Calculator to Compare Receivable Financing Companies

With our calculator, you can use the sliders to estimate the amount of additional working capital your company could have access to if the terms of your factoring agreement were more favorable to your business. Our factoring fees usually range from 1-6%, so if you’re paying a high factoring fee, requesting a quote from us could help lower the cost of receivables financing for your company.

Our factoring advances usually range from 85-98%, and are rarely less than 90%. If your advance isn’t in the upper 90 percents, requesting a free, no-obligation factoring proposal from us could help you gain access to additional working capital more quickly, with higher advances and less held in reserve against customer payment.

What Sets Our Invoice Factoring Services Apart

We believe that the way we do business sets us apart from many other invoice factoring companies. We view client factoring services with a long-term perspective, we look for reasons to say “yes!” and we try to earn your business, continued patronage and referrals day in and day out. When you choose DB Squared for receivables financing, you can expect:

  • A factoring fee as low as 1%
  • Advances up to 98% and free, same day funding (ACH)
  • Transparency! No hidden fees or add on fees to drive up the cost of factoring
  • No long term contracts – we want to earn your business
  • No factoring minimums – you stay in control and do what you feel is best for your organization
  • A dedicated account manager who understands your business goals and preferences

APPLY ONLINE or get a free, no-obligation quote for receivables financing by completing the form below. You could go from approval to your first funding in hours.