What factoring really costs: how the fee is charged, what moves it and an example with numbers.
Factoring costs a fee on each invoice you sell, as a percentage of the invoice. Depending on the contract, it's one flat fee, or it's charged every so many days while your customer hasn't paid: the longer your customer takes, the more you pay. 1st Commercial Credit publishes rates from 0.69% to 1.59%, depending on your volume, how fast your customers pay and their credit, and says its average client pays about 2.25%, depending on how many days the invoices take to be paid. Your own rate is confirmed in writing before you sign.
Daniel Chirino · Business Development Officer, 1st Commercial Credit
Updated: October 29, 2026
Two ways to charge the fee
One flat fee
A single percentage of each invoice, whenever your customer pays. If the contract says 3%, you pay 3% whether your customer pays in 10 days or in 60.
A fee by time
A percentage for every period the invoice stays unpaid, for example 1.5% for every 30 days. If your customer pays early, you pay less; if it pays late, you pay more. Ask how a period that has already started is counted.
Both examples come from 1st Commercial Credit's article on the cost of factoring. They show how the fee works, not what you'll pay.
An example with numbers
This is the example 1st Commercial Credit publishes on its invoice factoring page, with a 90% advance and a 2% fee as sample figures. Your advance and your fee will be the ones in your offer.
Want to try it with your numbers? Use the factoring calculator: you enter your fee, how it's charged and the days your customer takes.
| Invoice | $500,000 |
| Advance today (90%) | $450,000 |
| Fee (2% of the invoice) | −$10,000 |
| Released when your customer pays | $40,000 |
| Total you receive | $490,000 |
What moves your rate
- How long your customers take to pay.
- The advance you get on each invoice.
- Your industry.
- Your customers' credit.
- The size of each invoice.
- Your monthly volume, and any minimum volume you commit to.
That's the list 1st Commercial Credit gives in the disclosure on its own site, where it also explains that its published rates of 0.69% to 1.59% are tiered prices for qualified clients, and that its average client pays about 2.25%. Ask what your rate would be at the days your customers really take to pay, and get it in writing.
Fees besides the discount
Before you sign, ask any factoring company for every fee besides the discount, in writing: setup, transfers, minimum volume and what it costs to end the contract. 1st Commercial Credit says it charges no upfront setup fees, no facility fees and no audit fees.
In Florida, deals of $500,000 or less come with a written disclosure of what you receive and the total cost before you sign. See factoring in Florida, and the full list in questions to ask a factoring company.
Is the fee an interest rate?
No. It's a discount on an invoice you sell, not interest on a loan, so 1st Commercial Credit argues it shouldn't be turned into an annual rate. If you want to compare it with a loan, compare dollars for the same period: what the fee costs you on that invoice, against what a loan would cost you for the same days.
And compare it with what waiting costs you. Your customers already get a discount for paying early under terms like "2% 10, net 30". Factoring is like getting paid early without depending on your customer to do it. Waiting can mean missed supplier discounts, late payroll or turning down an order.
Questions owners ask me
Who pays the factoring fee, me or my customer?
You do. Your customer pays the full invoice to the factoring company, and the fee comes out of the balance released to you.
What happens to the cost if my customer pays late?
With a fee by time, every extra period adds to the fee. With a flat fee, it doesn't change. If your customer doesn't pay at all, it depends on whether your factoring is with or without recourse: see recourse vs non-recourse.
Do I pay a fee on all my invoices?
Only on the ones you factor. 1st Commercial Credit offers selective factoring: you choose which customers and invoices, as long as it isn't a one-time deal.
Is the published rate what I'll pay?
Not necessarily. 1st Commercial Credit's 0.69% to 1.59% are tiered prices for qualified clients, and its average client pays about 2.25%. Your rate comes from your customers, your days and your volume, and it should be in writing before you sign.
Have an offer and not sure what it costs?
Send me how the fee is charged and the advance. I'll walk you through what you'd pay on a real invoice, line by line, in English or Spanish.
Also read: factoring calculator · questions to ask before you sign · all guides