How Does Factoring Work – Part 2 of 2

Example of Accounts Receivables Financing if an invoice goes beyond 30 Days

In our first article How Factoring Work Part 1, we used an example of an invoice that is paid in 30 days.  For this article, let us assume that you have a corporate customer that normally pays beyond 30 days after they invoice them and the invoice amount is $10,000.00. By factoring their accounts receivable, they can receive an advance in a matter of hours. Here is how the math works:

Invoice Amount $10,000.00
80% Advance $ 8,000.00
Less: Initial Financing Fee $    350.00

Amount Advanced to the client $ 7,650.00
Amount Held in Escrow * $ 2,000.00
* When the invoice is paid, factor will refund the amount held in escrow is refunded to the client.If the invoice goes beyond 30 days, an additional $175.00 fee would be charge for each 15 day period or any portion thereof the invoice is outstanding. These additional fees would be deducted from the amount held in escrow.


Days out Total fees Escrow Amount Returned
1-30 days $350.00 $2000.00
31-45 days $525.00 $1825.00
46-60 days $700.00 $1650.00
61-75 days $875.00 $1475.00
76-90 days $1050.00 $1300.00
If an invoice goes beyond 90 days the client must repurchase that invoice.

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