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Invoice finance costs, fees and rates
Invoice finance costs depend on the service provided, the money drawn and the contract. Compare a written pound-value estimate using your ledger rather than treating one advertised percentage as the total price.
Find out what the service fee is charged on
The service element pays for running the facility and any agreed administration or collections work. A percentage may apply to turnover or a defined invoice base, while a minimum fee can set a floor on the amount payable.
Ask which sales are included, how credits are treated and what happens in a quiet month. Two identical percentages can produce different bills when the charging bases differ.
Separate optional services from the core fee. Payroll administration, credit protection or additional collections work should be identifiable rather than assumed to be included.
Calculate the charge on money actually used
The funding or discount charge usually reflects the balance advanced and the time it remains outstanding. Confirm the rate, whether it moves with a reference rate, the day-count basis and how often it is debited.
As a purely hypothetical example, £20,000 outstanding for 30 days at 10% a year costs about £164.38 on a 365-day basis. That excludes service fees and all other charges; it is not a quoted rate.
Repeat the calculation with a slower customer payment. If the borrowing remains outstanding longer, the funding cost can rise even when your sales do not. Use the expected collection date, not just the invoice due date.
Include minimums, setup and exit commitments
Request the complete fee schedule. Check for establishment, review, audit, payment transfer, protection and early termination charges where applicable. Establish which are fixed, usage-based or optional.
Read the minimum term and notice provisions alongside the price. A low monthly cost at peak turnover can look different if business slows or you want to refinance. Ask for worked costs under both circumstances.
Separate retained money from fees
An advance below 100% does not mean the difference is the price. For a £10,000 eligible invoice advanced at 80%, £8,000 is initially released and £2,000 remains before settlement adjustments. If agreed charges total £150 in a simplified example, £1,850 of that balance remains after those charges.
Reserves and excluded invoices can also restrict cash without being fees. Ask for two separate figures: what you can draw now and what the facility will cost. Neither can be reliably inferred from the headline advance rate.
Give every provider the same comparison assumptions
Use the same turnover, debtor ageing, expected drawings and payment timing for each proposal. Ask for a normal year, a quieter period and a late-payment scenario. Identify any assumptions that differ, including which customers or invoices are accepted.
Include the work retained by your accounts team. The cheapest fee is not necessarily the lowest combined cost if it leaves a significant collection workload.
Our factoring versus discounting guide explains those responsibilities. The funding-cycle guide shows how an advance and later settlement fit together.
Discuss costs using your own figures
Tell Positive Funding the value of your unpaid invoices, typical payment delays and likely funding use. We can help frame a comparison around the cash you need and the commitments in a provider’s proposal.