Hidden Costs in Invoice Finance - 8 Fees They Don't Mention Upfront

Every invoice finance provider will quote you a service fee and a discount rate. What they often will not mention upfront are eight additional charges that can add materially to your total cost. Here is what to look for in the small print, and how to negotiate each one out or down.

1. Arrangement Fee: £250 to £5,000

A one-off setup charge. UK broker ABC Finance puts set-up fees at £250 to £5,000 depending on facility size, and some providers waive it. Always ask for it to be waived - it is the easiest fee to negotiate away, especially if multiple providers are competing for your business.

2. Minimum Monthly Service Charge - £200 to £500/month

This is the one that catches people out. Even if you do not use the facility in a given month, you still pay the minimum. For seasonal businesses, this can mean paying hundreds per month during quiet periods when you have no invoices to finance.

3. CHAPS/Transfer Fee - £15 to £25 per payment

Every time the provider sends you money, they may charge a CHAPS fee. If you draw down every working day, five transfers a week at £15 to £25 each is £75 to £125 a week in transfer fees alone. Ask for Faster Payments (free) or negotiate a maximum of one CHAPS charge per week.

4. Annual Review Fee - £250 to £750

Charged each year when the provider reviews your facility. It covers their cost of re-underwriting your account. Some providers include this in the service fee - ask upfront.

5. Early Termination Fee - 3 to 12 Months' Charges

If you leave before the contract ends, you may owe the remaining months' minimum charges in full. For example, on a 12-month contract with a £400 monthly minimum, leaving 6 months early could cost you the remaining 6 months: £2,400. Some contracts set a fixed penalty instead, so check how yours is worked out. Negotiate the shortest possible notice period and the lowest termination penalty before you sign.

6. Auto-Renewal Trap

Many contracts auto-renew for another 12 months unless you give written notice 3 months before expiry. Miss the window by a day and you are locked in for another year. Put the notice date in your calendar the day you sign.

7. Credit Check Fees - £5 to £15 per Debtor

Providers credit check your customers before approving them. Some charge per check. If you have 50 customers to be checked at £5 to £15 each, that is £250 to £750 when the facility is set up. Ask how many checks are included and whether there is a cap.

8. Audit Fees - £500 to £1,500 per Visit

Providers audit your sales ledger periodically - typically once or twice a year. Some charge separately for the auditor's visit. Ask whether audit costs are included in the service fee and how many visits per year to expect.