What will invoice finance cost us in a year?
Add up the discount fee, service fee, minimum fees, audit, same-day payment and termination fees, and see the yearly cost as a share of your invoices and of the money you actually use.
With invoice discounting or factoring, the provider pays you a share of each invoice up front and you get the rest, less its fees, when your customer pays. You usually pay two main charges: a service fee, a percentage of the value of each invoice, and a discount fee, which works like interest on the money you have drawn until your customer pays. On top there can be a minimum service fee, audit fees, charges for same-day payments, and a payment if you end the agreement early.
A facility runs all year, so this calculator works out a typical year. It shows the cost as a share of the invoices you finance, and as a yearly rate on the average amount you have drawn, which you can set against the rate on a loan. That second figure is a simple yearly rate, not an APR.
Results
- Discount fee
- £11,737
- Service fee
- £6,000
- Top-up to the minimum fee
- £1,200
- Same-day payments
- £1,200
- Audit and other fees
- £1,000
- If you end it early (one-off)
- + £5,000
| Invoices a year | Cost a year | On money used |
|---|---|---|
| £900,000Invoices 25% lower | £18,203 | 14.5% |
| £1,200,000Your invoices | £21,137 | 12.6% |
| £1,500,000Invoices 25% higher | £24,371 | 11.6% |
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Worked example: £1.2 million of invoices a year, customers paying in 60 days
A made-up example, not a quote from any provider: 85% paid up front, a discount fee of 7% a year, a service fee of 0.5% of each invoice with a minimum of £600 a month, £1,000 a year of audit fees, four same-day payments a month at £25 each, and a £5,000 payment if you end the agreement early.
- Drawn on average: £1,200,000 × 85% × 60/365 days
- £167,671
- Discount fee: 7% a year on that
- £11,737
- Service fee: 0.5% of £1,200,000
- £6,000
- Top-up to the £600 a month minimum
- £1,200
- Same-day payments: 4 a month at £25
- £1,200
- Audit and other fees
- £1,000
- Cost a year
- £21,137
- As a share of your invoices
- 1.8%
- As a yearly rate on the money you use
- 12.6%
- Plus, if you end it early (one-off)
- £5,000
With 25% fewer invoices the facility would cost £18,203 a year, but 14.5% on the money you use instead of 12.6%, because the minimum service fee and the fixed fees stay the same.
Worth knowing
- Providers usually pay up to 80 or 90% of an invoice up front. The rest, less fees, comes when your customer pays.
- The minimum service fee is charged even when you put fewer invoices through, so the facility costs more for each pound you use in quiet months. The table shows this.
- Agreements usually run for a minimum period, and ending one early can mean an early termination payment. Check the minimum period and notice period before you sign.
- Fees may carry VAT, which this calculator does not add.
- Many providers offer protection against customers who do not pay, alongside the facility, at extra cost. Without it, you may be held responsible if a customer does not pay.
Routes this works for
Sources
- British Business Bank: Invoice finance · checked 8 October 2026
- Aldermore: Invoice Finance General Conditions (provider's own terms: service fee, minimum service fee, daily discount fee, early termination payment) · checked 8 October 2026
- Lloyds Bank Commercial Finance: Factoring, other fees and charges (provider's own fee list: same-day payment and audit charges) · checked 8 October 2026