⚖️ Factoring Break-Even Calculator

It compares two ways of covering the cash-flow gap between paying your carrier and getting paid by your shipper. The first is factoring your invoices at a percentage rate (plus any fixed fee). The second is self-funding the gap with your own working capital, which has an opportunity or borrowing cost set by your annual cost of capital. The tool shows the monthly cost of each path and the break-even factoring rate at which the two are equal.

The cash gap in days is your shipper payment terms minus your carrier payment terms, with a floor of zero. If you pay your carrier in 2 days but your shipper pays you in 30, your cash gap is 28 days. The working capital needed is your average daily invoice volume (monthly invoice volume divided by 30) multiplied by those gap days. If your carrier terms are the same as or longer than your shipper terms, there is no gap to fund.

The break-even factoring rate is the factoring percentage at which the cost of factoring equals the cost of self-funding the same cash gap. Below that rate, factoring is generally the cheaper option for the gap; above it, self-funding with your own capital tends to cost less. If the break-even rate works out negative — usually because a fixed monthly fee already exceeds the carrying cost — the tool shows 0% as a practical floor, since a factoring rate cannot go below zero.

Use the annual percentage cost of the money you would tie up to self-fund the gap. If you would draw on a line of credit, use that APR. If you would use cash that could otherwise earn a return or pay down debt, use that opportunity cost. There is no single correct number — it reflects what your capital is worth to your business. The figures here are estimates for comparison only, not financial advice.