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Factoring Advances
What Factoring Advance Rate Can Your Business Get?

The advance is the percentage of the invoice value that a factoring company will pay your company at the time of the sale of the receivables. This is not the final amount your company will be paid for the purchase of the invoices; you will get the balance minus the factoring fees at the time the payments are collected from your customers.

Let's say your are selling invoices for $100 and your pre-agreed advance rate is 80%. Your advance then would be $80.

How Much Your Advance Would Be?

Here is a calculator for you to see how the advance rate works.



Description Your Input
Invoice Amount
Advance Percentage (%)
Amount Advanced

How are Factoring Advance Rates Defined?

Before making you a proposal regarding invoice factoring advance rates, the commercial factoring company will analyze different parameters that influence your business and industry risk.

The following items are usually taken into consideration:

Your Industry

Industries that supply products generally receive lower advances than industries that simply provide service.

There are fewer opportunities for a dispute to arise in case of provision of services, for example once delivered to a client a service cannot be returned or found to be defective.

Your Business Identified or Potential Dilution

When defining your factoring advance rate, a factoring company will analyze your business dilution rate which takes in account the offsets that can affect the payment of your receivables.  Dilution is the difference between the gross value of your invoices and the payment that is actually collected from your customers.  This difference can be represented by a number of factors such as returned goods, bad debt write-offs, discounts offered, etc.

factoring advance rate

Let’s say that during the last year your company billed your customers $10,000 for the sale of products but collected $9,000. Your received returns of goods for $500, offered discounts for prompt payment for $300, and were not able to collect $200 due to customer insolvency.  This $1000 difference between your invoices and your final collections is your company dilution.

Your dilution rate is the percentage that your dilution represents over the gross value of your invoices. The calculation would be the following:

Dilution Rate = Dilution Amount/ Gross Invoice Value = $1000/$10000 = 10%

The higher your dilution rate the lower the advance rate you will likely be offered.

Customer Creditworthiness

The credit background of you company’s customer base, size and reputation also affects the invoice factoring advance rate that factoring companies will be willing to provide you.

As a general rule you are likely to get a higher factoring advance rate if most of your customers are big companies with strong credit history than if they are mom & pop businesses.


The number of customers and the percentage of business each customer represents to your company are used to define the concentration rate. Businesses with just a few customers where one or two customers produce most of the company’s income have very high customer concentration rate

The higher your concentration rate is the lower the advance rate you are likely to get, and vice versa.

High concentration deals are generally frowned upon by factors. 

Next section explains the factoring application, approval and funding process so you can get an idea of the steps that are involved and how long they take.

invoice factoring process