Invoice finance costs: fees, rates and what you'll actually pay
Two charges make up most of the cost. Here is what each one covers, what moves the price, and three worked examples using the same assumptions as our calculator.
By Chris Findlow · Updated October 2026
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The short answer
Most invoice finance costs come down to a service fee, typically 0.1% to 3% of turnover, and a discount charge on the cash you draw, typically base rate plus 1.75% to 3.5%.
On top of that, some facilities carry arrangement, minimum usage or exit charges. What you pay depends on your turnover, sector, customers and which product you choose.
Service fee
0.1% to 3%
Charged on the turnover you put through the facility. It pays for running the facility and, with factoring, the lender's credit control.
Discount charge
Base + 1.75% to 3.5%
Interest on the cash you draw, only for the days it is drawn. Bank of England base rate is 3.75% (held on 30 July 2026, source).
How the service fee is set
The service fee reflects how much risk and work the lender takes on. Within the range above, our calculator uses these illustrative bands. They are not lender quotes.
- 0.2% (corporate)
- 0.5% (typical)
- 0.75% (typical, upper)
- 1.0% (high)
- 1.5% (high, upper)
- 2.0% (very high risk)
Confidential invoice discounting sits towards the lower end because you keep credit control. Factoring sits higher because the lender collects for you.
Other charges to ask about
Not every facility has these, but ask about each one before you sign.
- Arrangement fee for setting the facility up.
- Minimum usage or minimum fee if you put less through than agreed.
- Audit fees for the lender's periodic checks of your ledger.
- Notice period or exit fee if you leave before the minimum term.
- Bad debt protection, an optional extra that covers you if a customer doesn't pay.
Worked examples
Three illustrative businesses, calculated with the same method as our calculator. These are not lender quotes.
| Business | Invoiced a month | Assumptions | Cost a month | % of turnover |
|---|---|---|---|---|
| Growing services business | £50,000 | 85% advance, 0.75% service fee, paid in 45 days, base + 3% | £729 | 1.5% |
| Established wholesaler | £200,000 | 85% advance, 0.5% service fee, paid in 60 days, base + 3% | £2,886 | 1.4% |
| Construction subcontractor | £80,000 | 80% advance, 1% service fee, paid in 90 days, base + 4% | £2,023 | 2.5% |
What moves your price
Lenders price on risk and volume.
- Turnover and volume. Larger, steadier ledgers tend to price more keenly.
- Your customers. Strong customers who pay reliably reduce the lender's risk.
- Your sector. Some sectors, such as construction with its retentions, need a lender who understands them.
- The product. Whole-ledger, confidential and selective facilities all price differently. See factoring vs invoice discounting.
How to compare quotes
Compare the total annual cost, not one line.
A low service fee can be offset by a higher discount margin or a minimum fee. Ask each lender for every charge, then work out what you would pay in a typical year. That comparison across many lenders is what we do for you.
Calculate your cost
Put in your own figures.
Estimated costs
Based on your inputs. Not a quote and not a recommendation.
- Amount advanced
- £42,500
- Service charge
- £375/month
- Discount charge
- £354/month
- Estimated monthly cost
- £729
- Estimated annual cost
- £8,748
- Cost as % of turnover
- 1.5%
Email me my results
Send this indicative breakdown to your inbox.
- Monthly invoice value
- The total value of B2B invoices you typically raise each month. Use a realistic average for the period you want to model, not a one-off peak month.
- Advance rate
- The percentage of each invoice value the lender pays you upfront. Factoring and selective invoice finance typically run at 80% to 90%, and confidential invoice discounting can reach 100%, depending on debtor quality. The rest is usually released when your customer pays, less fees.
- Service charge
- The administration fee for running the facility. FundingLinks typically sees around 0.5% to 0.75%, with corporate facilities often 0.2% to 0.5%, higher-risk cases around 1% to 1.5%, and very high-risk cases around 2%. This calculator applies an illustrative monthly percentage to your monthly invoice value.
- Average days to payment
- How long your customers usually take to pay after you invoice them, often 30, 60 or 90 days. Longer payment times increase the discount charge because the advance stays outstanding for more days.
- Discount charge (annual)
- Interest-like cost on the cash advanced to you. Lenders usually quote it as a margin above Bank of England Bank Rate. FundingLinks typically sees around base plus 3%. The calculator converts that annual rate across your assumed payment days.
Invoice finance cost FAQs
How much does invoice finance cost per month?
It depends on how much you invoice and how long customers take to pay. As an illustration, a business invoicing £50,000 a month with a 0.75% service fee and customers paying in 45 days would pay roughly the service fee plus interest on the cash drawn. The worked examples on this page show the monthly total for three different businesses.
Is invoice discounting cheaper than factoring?
Usually. The discount charge is similar for both, but the service fee is lower on confidential discounting because you keep credit control. Our guide to factoring vs invoice discounting compares them in full.
Do I pay interest on the whole facility?
No. The discount charge applies only to the cash you actually draw, for the days it is drawn. The service fee is charged on turnover put through the facility.
Are there set-up or exit fees?
Some facilities have arrangement fees, minimum usage charges or notice periods. Ask for every charge in writing and compare the total cost, not the headline rate.
Why does my quote differ from the calculator?
The calculator uses illustrative assumptions. A lender prices your facility on your turnover, sector, customers and history, so your quote can be higher or lower.
Written by
Chris Findlow
Director, FundingLinks
Director at FundingLinks with over 15 years across commercial lending, invoice finance and fintech partnerships, including senior leadership roles at Kriya. He works directly with SMEs to match them to the right lender across the whole market.
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