Factoring vs ABL calculator

Factoring or a bank line: what each one costs you.

Put your factoring terms next to an ABL term sheet. The calculator works out how much cash each one gives you against the same receivables, what each costs a year and the effective annual rate. Nothing you enter leaves your browser.

The numbers filled in are examples. Replace them with your own terms.

Your receivables Sales invoiced per month ($)What you bill customers on terms in a typical month. Days your customers actually take to payYour real average from the A/R aging.

Factoring Advance rate (%) Discount rate per period (%) Fee period (days) Other factoring fees per month ($)Wires, uploads, service charges, minimum-volume shortfalls.

ABL Eligible receivables (%)The share of your receivables the bank will count. Old invoices and invoices to related companies usually do not. Advance rate on eligible receivables (%) Interest rate per year (%)The rate on your term sheet. Most ABL lines float over a benchmark such as prime or SOFR. Other ABL fees per month ($)Unused line fee, collateral monitoring, wires. ABL fees per year ($)Field exams, renewal, legal.

Side by side

Average receivables outstanding: —

Factoring

Cash available: —
Cost per year: —
Effective annual rate: —

ABL

Cash available (borrowing base): —
Cost per year: —
Effective annual rate: —

On the same cash, per year: —

What this tells you, and what it does not

The comparison is on cost: the same receivables, financed two ways. It assumes you draw the same cash on the ABL that the factor would advance, up to what the line allows. Where the line gives you less, the yearly difference is worked out on the cash both give you.

It does not put a number on the things that decide whether an ABL works for your company:

Covenants. A coverage test or a minimum availability you cannot meet in a bad month turns the cheaper line into the expensive one.
Reporting. Borrowing base reports on a set schedule, monthly financials and field exams.
Fit. A bank that does not lend in your industry protects itself with a smaller advance and tighter rules on which invoices count.
The switch. Paying off the factor, releasing its lien and giving your customers new payment instructions, timed around payroll.

Read the covenants before you read the rate. How we match the bank to the company »

Questions

Straight answers.

Is an ABL always cheaper than factoring?

Not always. The rate is usually lower because the bank is lending against your receivables rather than buying them. But an ABL has fees of its own, reporting every week or month, and covenants. For a company that fits the bank, it is usually the better deal. For one that does not, it can be the more expensive mistake.

What is a borrowing base?

The amount the bank will lend at any point: your eligible receivables times the advance rate, and sometimes part of your inventory. It moves as you invoice and as customers pay, and you report it to the bank on a set schedule.

Why would an ABL give me less cash than my factor?

Banks do not count every invoice. Old invoices, invoices to related companies and some slow payers are usually left out, and the advance rate on what is left can be lower than a factor's. Run your own aging through the eligible percentage before you count on the line to cover payroll.

What ABL fees should I ask about?

Ask for every charge in writing: unused line fees, collateral monitoring, field exams, wire fees, legal and renewal. Put the monthly ones and the yearly ones into the calculator.

Already holding an ABL term sheet?

Send it over with your current factoring terms and your A/R aging. We will tell you whether that bank fits and what the covenants will do to you in a bad month.

Send the numbers »