Invoice Factoring True APR

A 3% fee to get paid 30 days early sounds cheap. It's not. Unmask the true annualized cost of capital (APR) on B2B invoice factoring and cash advances.

Factoring Terms

The total value of the outstanding invoice.
The flat percentage the platform charges to advance the cash.
How many days before the client actually pays the invoice.
True Annualized Interest Rate (APR)
37.6%
This is the actual cost of borrowing this money.
Total Fee Paid
$300
Taken from the advance
Net Advance
$9,700
Cash deposited today

The Profit Margin Trap

If your business runs on a standard 20% profit margin, this factoring fee just wiped out 15.0% of your total net profit on this invoice.

Why is the APR so high?Because you are paying a 3% interest rate for a loan that only lasts 30 days. If you continually rolled this debt over for an entire year (365 days), the compounding cost would mathematically equal a 37.6% credit card.

Frequently Asked Questions

Direct answers to the most common queries, optimized for clarity.

To calculate the true Annual Percentage Rate (APR) of getting an invoice paid early, use this formula: (Fee Amount / Net Advance Amount) × (365 / Days Advanced) × 100. For example, a $300 fee on a $9,700 advance for 30 days is ($300 / $9,700) × (365 / 30) × 100 = 37.6% APR.

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