In invoice factoring, the advance rate is the percentage of an invoice's face value the factor pays you up front. If you factor a $10,000 invoice at a 90% advance rate, you get $9,000 now; the remaining $1,000 (the reserve) is released, minus the factor's fee, when your customer pays.
Typical advance rates
Advance rates vary by industry and risk. Freight factoring often runs 90-97%. Staffing and general invoice factoring commonly sit around 80-90%. Construction is usually lower, around 80-90%, because of retainage and dispute risk. The stronger and cleaner the receivable, the higher the advance.
Advance rate vs fee
Do not confuse the advance rate with the cost. The advance rate is how much you get now; the factoring fee (a small percentage) is what factoring costs. A 90% advance with a 2% fee means you receive 90% immediately and keep 98% of the invoice overall once the customer pays.