About the Factoring Cost Calculator
What is the Factoring Cost Calculator?
In factoring, a business sells or assigns its receivables to a factor, which advances cash and often manages collections. The factoring cost has two parts: a service commission on the invoice and interest on the money advanced.
This calculator adds both, including 18% GST on the commission, and converts them into an effective annual rate you can compare with a bank loan.
How to use the Factoring Cost Calculator
- Invoice Value (₹) (sample: 20,00,000)
- Advance Rate (% of invoice) (sample: 80)
- Factoring Commission (% of invoice) (sample: 1)
- Interest on the Advance (% per year) (sample: 12)
- Collection Period (days) (sample: 90)
- Type (sample: With recourse)
- Press Calculate Factoring Cost (results also refresh as you type). The result card shows the Total Factoring Cost, along with Advance received, Commission + GST, Interest on the advance and Balance on collection (less interest).
Formula used
Total cost = Invoice × Commission % × 1.18 + Advance × Rate × Days ÷ 365
- Advance = invoice × advance rate
- Effective annual cost = total cost ÷ advance × 365 ÷ days
Without-recourse factoring costs more because the factor carries the risk of the buyer not paying.
Worked example
These are the sample values already filled in the calculator above, and the result it returns for them:
| Input | Sample value |
|---|---|
| Invoice Value (₹) | 20,00,000 |
| Advance Rate (% of invoice) | 80 |
| Factoring Commission (% of invoice) | 1 |
| Interest on the Advance (% per year) | 12 |
| Collection Period (days) | 90 |
| Type | With recourse |
| Result | Value |
|---|---|
| Total Factoring Cost | ₹70,942 |
| Advance received | ₹15,76,400 |
| Commission + GST | ₹23,600 |
| Interest on the advance | ₹47,342 |
| Balance on collection (less interest) | ₹3,52,658 |
| Effective annual cost | 17.98% |
Tips for using the Factoring Cost Calculator
- Factoring in India is governed by the Factoring Regulation Act, 2011.
- Check for minimum fees and charges on invoices that are paid late.