Advance rate

How much of an invoice the factor pays immediately—typically 80 to 95 cents on the dollar—before the customer has paid anything.

Why it matters

A higher advance rate means more upfront cash, but it does not change the total fees charged. Some programs offer 95 percent advances with the understanding that fees come out of the reserve before release. Verify whether the advance rate can be lowered by the factor after initial approval, and confirm whether different account debtors receive different advance rates within the same program.

How it appears in contracts

Look for 'Advance Rate' or 'Funding Percentage' in the Definitions section of the agreement. The rate may be expressed as a fixed percentage or as a range subject to the factor's internal credit review of each debtor. Confirm whether the rate is uniform across all approved debtors or varies by account. Pay attention to any language permitting the factor to reduce the advance rate unilaterally if a debtor's credit profile deteriorates after initial approval—some contracts allow this on 30 days' notice, which can materially affect cash flow mid-contract.

Related terms

Related article: What is invoice factoring?

Related reading

Sources

  • International Factoring Association - International Factoring Association. Accessed 2026-05-19. Industry association source for factoring terminology and industry context.
  • Secured Finance Network - Secured Finance Network. Accessed 2026-05-19. Industry education source for secured finance and asset-based lending context.
Financial disclaimer. This page is educational only and is not financial, legal, tax, accounting, or credit advice. Factoring terms vary by provider and contract. Read the full disclaimer.