Factoring fees are discount amounts that factoring companies charge for invoice advance services provided when outstanding receivables are purchased. These fees are usually collected at the time the payment is received from the debtors.
Factoring rates, also known as factoring discount rates, are used to calculate the factoring fee that your company will pay a factoring company for its invoice factoring services.
The type and amount of factoring rate that you company will be offered mainly depends on several parameters:
This first section will help you understand how factoring rates are usually structured
Factoring companies use several parameters to structure their discount rates. Understanding how rates are structured is crucial when analyzing factoring proposals. We will now describe with examples the most common approaches currently used in the factoring industry.
Let’s say that you are selling a $100 invoice due in 60 days and have been offered an advance rate of 80%. Let’s see how factoring fees will be calculated using the two most common methods. Click here to learn what a factoring advance rate is. 
Your $100 invoice discount fee would then be:
First 30 days: $100 *1.5% (or 0.015) = $1.50
Second 30 days: $100 * 1% (or 0.01) = $1.00
You total factoring fee for 60 days = $1.5+$1 = $2.50
Here is a simple calculator for you to see how this works.
Flat Discount Calculator Instructions This script will calculate the factoring fee for the period the discount rate covers (e.g. 1.5% for 30 days). If you have more than one period/rate you'll need to make separate calculations. (e.g. in our example you'll need to calculate first 1.5% for the first 30 days, then 1% for the second 30 days and then add the results) Complete fields on grey background entering numbers only. 

Prime rate is the shortterm interest rate (annual) used in the US banking system. Currently the Prime Rate is around 3.25%.
Most factoring companies will use a combination of a flat fee and an annual interest rate to define their discount rates. As an example you can get an offer that includes PRIME plus 3 % calculated on the advanced amount plus a flat discount of 1.00% every 30 days calculated on the gross amount of invoices factored.
Let’s see how this would work with numbers:
Your $100 invoice due in 60 days will pay the following fees.
Your Fee Every 30 days
PRIME plus margin: 3.25% + 3% = 6.25% annual
Your Rate for 30 days would be: (PRIME RATE + Margin)/360days= 6.25% /360 equal a daily rate of .017%.
This fee is usually calculated only on the amount advanced so we need to calculate your advance.
Amount advanced: $100 * 80% (advance rate) = $80
The part of your fee based on prime plus margin would then be: $80*.017% *30 days = $0.42
The flat discount is usually calculated on the gross amount of invoices factored. In this example the amount discount would be $100*1.00% = $1.00
Your total discount fee every 30 days would then be $0.42 + $1.00= $1.42
If your invoice is paid in 60 days your total discount fee would be $1.42+$1.42= $2.84
Here is a calculator (example for 30 days)for you to see how this rate structure works.
Factoring Fee Calculator Instructions This script will calculate the factoring fee for the period the flat discount covers (e.g. 1% for 30 days). If you have more than one period/rate you'll need to make separate calculations. (e.g. in our example you'll need to calculate first 1.0% for the first 30 days, then 1.00% for the second 30 days and then add the results) Complete fields on grey area. Input numbers. No $,%, etc characters allowed. 

The options described above are the most common ones found in factoring proposals. However, these are not the only ones. It is very important for you to fully read and understand a factoring proposal, review the numbers and take into account other important variables before drawing conclusions about choosing a commercial factoring company.
Going back to the ads including teaser rates you should first ask yourself:
Confusing, isn’t it? As you can see a published rate does not mean anything if you don’t know the entire context used to define it.
The truth is that is almost impossible for a factoring company to make you a legitimate proposal without truly analyzing your situation. There are many factors that influence the definition of rates. A factoring company needs to take a look at your company’s background, customer base, receivables position, financial situation, and industry to be able to truly measure potential risks before making you a serious offer. Think twice about those factors that send you an immediate proposal without conducting any due diligence.
The next section will help you understand the factors that influence the perceived risk level and help define the discount rate your company can get.