Invoice Finance Costs
Understanding the costs of invoice finance.
Understanding the full cost structure of an invoice finance facility is essential for making an informed decision. The pricing model typically consists of several components, and comparing providers requires looking beyond headline rates to assess the true total cost of each facility.
Aberdeen Corporate Finance compares the complete cost profile of each provider \u2014 not just the headline numbers \u2014 and negotiates on your behalf to secure the most competitive terms available in the market.
Cost Components Explained
Service Charge (Administration Fee)
A percentage of your gross annual turnover, typically 0.5–3.0%. This covers the factoring company's credit management services, collections activity, and administration. Higher-service facilities (full factoring with credit control) attract higher service charges than confidential discounting.
Discount Charge (Interest)
Interest charged on the funds advanced to you, calculated on a daily basis against the outstanding balance. Typically quoted as a percentage above bank base rate (e.g., base + 1.5–3.0%). This is equivalent to the interest on an overdraft or loan and is the cost of accessing the cash early.
Arrangement Fee
A one-off fee charged when the facility is set up, typically £500–£3,000 depending on the complexity and size of the facility. Some providers waive arrangement fees for larger facilities or as a competitive incentive.
Bad Debt Protection Premium
If you opt for non-recourse (bad debt protected) factoring, an additional charge of typically 0.3–1.5% of insured turnover applies. This is essentially credit insurance that protects you against debtor insolvency.
Minimum Charges
Many factoring agreements include minimum monthly or quarterly charges that apply if your actual usage falls below a certain threshold. Ensure you understand the minimum commitments and that they are achievable based on your projected turnover.
Contract Terms & Exit Fees
Factoring contracts typically run for 12–24 months with notice periods of 3–6 months. Early termination fees may apply if you exit before the minimum term. Rolling monthly contracts are available from some providers, usually at slightly higher rates.
Indicative Costs
Service Charge
Discount Rate
BDP Premium
Setup Fee
Actual costs depend on turnover, debtor quality, sector, and facility type. Contact us for a bespoke quotation.
Important Notice: Costs are indicative and vary by provider. All facilities are subject to individual assessment. Aberdeen Corporate Finance Limited is not regulated by the FCA.
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Contact us for a detailed cost comparison from our panel of invoice finance providers.
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