Factoring 101- Understanding the discount

Invoice factoring isn’t some niche, last-resort product anymore. It’s become a true Main Street financing tool used by growing businesses across industries. And as it’s become more mainstream, pricing has evolved right along with it.

Today, factoring costs are far more competitive than many people expect. Your rate will depend on a few key variables: your monthly volume, your industry, how clean your invoicing is, and most importantly, the credit quality and payment performance of your customers.

In 2026, it’s not unusual to see discount fees at less than 1.20% for 30 days in the right situation. Strong customer credit, low concentration, predictable payment history, and solid volume all work in your favor.

It’s also important to understand what you’re comparing. Factoring isn’t priced like a term loan because it’s not a term loan. It scales with your sales, adjusts with your receivables, and typically doesn’t create long-term debt on your balance sheet. You’re monetizing an asset you already earned.

When structured correctly, factoring becomes less about “cost” and more about return. If reliable cash flow allows you to take on new projects, secure vendor discounts, hire staff, or eliminate the need for expensive short-term debt (like stacked MCA loans), the economics often make sense very quickly.

The real question isn’t just, “What’s the rate? It’s, “What does predictable cash flow allow my business to do?”