Tools for
Owner/Operators
&
Trucking Fleets
Compare the true cost of invoice factoring against a business credit line — so you can see which option puts more money in your pocket.
Both invoice factoring and a business line of credit solve the same problem — you are owed money and you need it now — but they price that solution in ways that are almost impossible to compare by eye. Factoring charges a percentage of every invoice, so its cost scales with your revenue no matter how quickly your customers pay. A credit line charges interest only on what you have drawn and only for the days you have it drawn, so its cost scales with how long the money is out.
That difference is why a rate comparison alone is meaningless. A 3% factoring fee is not directly comparable to a 12% APR, because the factoring fee is charged once per invoice while the APR is annualised. The way to compare them is to convert both to the same unit: total dollars per month against the same revenue.
This calculator does that. It also surfaces the break-even point — the average days-to-pay at which the two options cost the same. Below it, one option wins; above it, the other does. Knowing where that line sits for your business tells you whether the answer changes when your customers start paying slower.
Factoring companies typically charge a percentage of each invoice's face value, commonly in the range of roughly 1.5% to 4% depending on your volume, the creditworthiness of your customers, how quickly they pay, and whether the arrangement is recourse or non-recourse. On top of the headline rate, watch for wire and EFT fees, monthly minimums, annual or renewal fees, and charges for invoices that age past a set number of days.
Usually not on a pure cost basis, but that is not the whole comparison. A credit line almost always costs less per dollar of working capital, especially if your customers pay reasonably quickly. Factoring wins on availability — it is far easier for a new or thinly capitalised carrier to qualify for, and the facility grows automatically with your invoicing rather than being capped at a fixed limit. The right question is not which is cheaper in the abstract but which you can actually get, and what the cheaper option would be worth to you.
With recourse factoring, if your customer never pays, you have to buy the invoice back — you keep the credit risk, and the rate is lower. With non-recourse factoring, the factor absorbs the loss if the customer becomes insolvent, and you pay a higher rate for that protection. Read the definition of non-recourse in your specific agreement carefully; it typically covers customer insolvency only, not a dispute over the load.
The advance rate matters as much as the fee — if a factor advances 90% and holds a 10% reserve, that reserve is your cash sitting with them until the invoice clears. Also check for set-up fees, monthly minimum volume requirements, wire or same-day funding charges, credit check fees per customer, termination penalties, and long notice periods on contract renewal.
When the alternative is not a cheaper facility but no facility at all. If you cannot qualify for a credit line, or the line you can get is too small to cover your receivables, factoring is the difference between taking loads and turning them down. It also makes sense as a deliberate short-term bridge — many carriers factor during their first year, build a track record, then move to a credit line once a bank will have them.
Sometimes, but not always without conflict. A factoring company generally takes a security interest in your receivables, which is the same collateral a lender would want for a credit line. If you are considering both, disclose each to the other and check the intercreditor position before signing, or you may find one facility blocks the other.