Methodology: How The Simulator Models Factoring Costs

Factoring Fundamentals

How the Simulator Models Factoring Costs

The Funding Explorer Invoice Factoring Simulator computes the true cost and cash flow of a factoring offer by running your invoices through the full factoring cycle, advance, reserve hold, customer payment, and reserve release, with the offer’s exact terms applied where the agreement applies them. It models the agreement, not just the advertised rate.

It Models the Agreement, Not Just the Rate

There is no standard factoring contract, so the simulator doesn’t assume one. It accepts the terms of a real agreement: any of the rate structures used in the industry, either fee basis (invoice value or amount advanced), the advance and reserve terms, the complete fee schedule of the agreement, recourse or non-recourse structures, and the way your customers actually pay, including invoices that run late. If it affects what you pay or when you get your money, it’s in the model.

Cost, Measured Three Ways

A single cost number hides more than it reveals, so the simulator reports three: the total dollar cost of the scenario, the cost as a percentage of the amount factored, and the cost as a percentage of the amount advanced, the effective rate on the cash you actually received. That last number is what makes offers with different advance rates genuinely comparable, and it’s the one most quotes never show you.

Cash Flow, Not Just Cost

The simulator also answers the question a cost figure can’t: how much usable cash you’ll actually hold, and when. Results include a week-by-week view of your cash position, advances, payments, and reserves held and released, because two offers with similar costs can feel very different in your bank account. Every result is shown with its assumptions visible, and any scenario can be compared side by side with a second offer and exported as a PDF report.

What the Simulator Does Not Do

It does not recommend a factoring company, no list, no partners, no referral fees.
It does not produce quotes. Results are estimates based on the inputs you provide; your actual agreement governs. Consult your financial advisor or accountant before committing to any agreement.

These constraints are the point: the simulator exists to give you the numbers, not to steer your decision.

Disclaimer: The simulator is designed for planning and comparison purposes. Results are estimates only; some deal-specific variables may affect your actual costs and cash flows. Please consult your financial advisor or accountant before committing to any agreement.

Last Updated: July 9th, 2026

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