Invoice Finance Cost Calculator
Estimate your monthly invoice finance costs based on your turnover, advance rate, and payment terms. Adjust the inputs to see how different scenarios affect your costs.
Estimate your monthly invoice finance costs in 30 seconds.
Your Estimated Costs
These are estimates. Actual costs vary by provider. Get 3 free quotes for accurate pricing.
How Invoice Finance Costs Are Calculated
Invoice finance has two main costs. The service charge (0.5-3% of invoice value) covers administration, credit checks, and credit control (if using factoring). The discount charge (Bank of England base rate + 1-3%, charged daily) is interest on the amount advanced to you. Total monthly cost depends on your invoice volume, advance rate, and how quickly your customers pay.
For example, a business with £50,000/month in invoices, an 85% advance rate, 1.5% service charge, and 6.5% discount charge with 45-day terms would pay approximately £909/month - or 1.8% of turnover.
The fastest way to reduce costs is to improve your debtor quality (blue-chip customers attract lower rates) and reduce payment days. See our full costs guide for detailed strategies.
Cost Scenarios by Business Size
The table below shows estimated monthly and annual costs across different turnover levels. All scenarios assume an 85% advance rate, 45-day average payment terms, and the current Bank of England base rate of 3.75%.
| Annual Turnover | Service Charge | Est. Monthly Cost | Est. Annual Cost | % of Turnover |
|---|---|---|---|---|
| £100,000 | 2.0% | £260 | £3,120 | 3.1% |
| £250,000 | 1.5% | £535 | £6,420 | 2.6% |
| £500,000 | 1.2% | £910 | £10,920 | 2.2% |
| £1,000,000 | 0.9% | £1,510 | £18,120 | 1.8% |
| £2,500,000 | 0.7% | £3,215 | £38,580 | 1.5% |
| £5,000,000 | 0.5% | £5,420 | £65,040 | 1.3% |
Source: Market Invoice analysis, April 2026. Based on mid-range provider pricing, 85% advance rate, base rate 3.75% + 2% discount margin, 45-day terms. Your actual costs may be higher or lower.
The Five Factors That Determine Your Cost
1. Your Annual Turnover
Higher turnover = lower percentage rates. A business processing £5m of invoices annually will get 0.3-0.75% service charge, while a £100k business might pay 2-3%. The fixed costs of running your facility (credit checks, account management, legal) are the same regardless of size, so larger facilities spread these costs over more volume.
2. Your Customers' Creditworthiness
The provider is lending against your customers' invoices, so their credit quality matters more than yours. Invoicing blue-chip corporates, NHS trusts, or government departments attracts the lowest rates. Invoicing small private companies with no credit history costs more because the risk of non-payment is higher.
3. Average Payment Days
The discount charge accrues daily. If your customers pay in 30 days, you pay roughly half the discount charge of someone whose customers pay in 60 days. Industries with shorter payment cycles (recruitment, transport) pay less in discount charges than those with longer terms (construction, manufacturing).
4. Your Industry
Some industries are considered higher risk. Construction attracts higher service charges (1.5-3%) because of retention, stage payments, and contra charges. Recruitment is lower risk (0.75-2%) because invoices are straightforward and debtors are established businesses. See our industry guides for sector-specific pricing.
5. Factoring vs Discounting
Factoring (where the provider manages credit control) costs 0.5-3% because you are paying for a service. Discounting (where you retain credit control) costs 0.3-0.5% because the provider does less work. If your turnover exceeds £500,000 and you have your own credit control, discounting will be cheaper.
Hidden Costs to Watch For
The calculator above estimates service charge and discount charge - the two main costs. But invoice finance often comes with additional fees that are not included in headline rates. Make sure you ask about these before signing:
| Fee | Typical Range | When Charged |
|---|---|---|
| Arrangement fee | £500-£2,000 | One-off at setup |
| Minimum monthly charge | £200-£500/month | Every month, even if you submit zero invoices |
| CHAPS/faster payment fee | £15-£25 per transfer | Each time you draw down cash |
| Annual review fee | £0-£500 | Yearly |
| Re-factoring fee | £25-£50 per invoice | If a customer returns/disputes an invoice |
| Bad debt protection | 0.3-1.5% of invoice value | Per invoice (optional) |
| Early termination fee | 3 months minimum charges | If you leave before contract ends |
How the Base Rate Affects Your Costs
The discount charge is quoted as "base rate plus X%". With the Bank of England base rate currently at 3.75%, a discount charge of "base + 2%" means you are paying 6.50% annualised interest on the amount advanced. If the base rate rises to 5.00%, your discount charge automatically increases to 7.00%.
This means invoice finance costs are directly linked to monetary policy. During 2022-2024, when the base rate rose from 0.1% to 5.25%, the discount charge element of invoice finance roughly tripled. Conversely, when rates fall, your costs fall automatically without needing to renegotiate.
Some providers offer fixed-rate discount charges (typically 1-2% above the variable equivalent) which protect you against rate rises. Ask your provider if a fixed-rate option is available - it can be worth it if you believe rates will increase during your contract term.
Is Invoice Finance Worth the Cost?
The cost of invoice finance needs to be weighed against the cost of not having it. Late payment costs UK SMEs an estimated £684 million per year in wasted time, missed opportunities, and emergency borrowing. If your business regularly waits 30-90 days for payment while needing to cover payroll, rent, and supplies, invoice finance converts that wait into immediate cash.
The real question is: what does late payment cost your business? If you are turning down work, paying overtime for emergency orders, missing supplier discounts, or at risk of failing to meet payroll, the 1-3% cost of invoice finance is almost certainly cheaper than the alternative. For a detailed analysis, see our guide on whether invoice finance is expensive.
From estimate to actual quote
This calculator gives you a budgeting estimate. For your actual cost, you need a real invoice finance quote from a provider that has seen your turnover, debtor mix and industry. Quotes are free, take 60 seconds to request, and let you compare like-for-like across three providers.
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Cost Calculator FAQ
How accurate is this calculator?
This calculator provides estimates based on typical market rates. Actual costs vary by provider, your industry, debtor quality, and facility size. Use it for budgeting, then get real quotes for accurate pricing.
What is the service charge?
The service charge covers administration, credit checks, and (for factoring) credit control. It is charged as a percentage of the gross invoice value, typically 0.5-3%. Larger facilities get lower rates.
What is the discount charge?
The discount charge is effectively interest on the money advanced to you. It is quoted as a percentage above Bank of England base rate and charged daily on the outstanding advance until your customer pays.
How can I reduce my invoice finance costs?
The main ways to reduce costs are: increase your turnover volume, improve debtor quality (blue-chip customers), reduce average payment days, negotiate longer contract terms, and compare multiple providers to leverage the best rates.
How accurate is the Market Invoice calculator compared with a real quote?
The calculator gives a realistic range, not a bookable quote. It applies the published service-charge bands used by mainstream UK providers (0.5% to 3% of invoice value) and a discount margin of 1% to 3% over Bank of England base rate (currently 3.75%, last updated 18 March 2026). Real quotes will move with debtor quality, sector, customer concentration and turnover. Recruitment, manufacturing and clean B2B ledgers tend to come in at or below the calculator's mid-point. Construction, single-customer concentration and stage payments tend to come in above. Use the calculator to pressure-test offers, then request a written facility letter before signing.
What inputs change the invoice finance cost most?
Three inputs move the headline cost more than anything else. First, invoice value: facilities under £100,000 a month attract higher service-charge percentages because fixed administration cost is the same regardless of size. Second, average payment days: 30-day terms cost roughly half what 90-day terms cost on the discount-charge side because the discount charge is daily on advanced funds. Third, whether you choose factoring or invoice discounting: factoring includes credit control and tends to sit 0.3% to 0.8% higher on service charge. Customer concentration above 30% on one debtor will also lift the rate.
Why does the calculator separate service charge and discount charge?
UK invoice finance has two distinct costs and providers price them separately on every facility letter. The service charge is a percentage of invoice value (0.5% to 3%) that pays for ledger management, credit control if factoring, and administration. It is charged as soon as the invoice is submitted. The discount charge is a daily interest rate (base rate plus 1% to 3%) on the cash advanced to you, charged only for the days the advance is outstanding. Lumping them into one figure hides which one you can negotiate. Service charge is harder to move; discount margin moves with debtor quality.
Does the calculator include hidden costs?
The calculator covers service charge and discount charge, which together are 90% of total cost on a clean facility. It does not include setup or arrangement fees (typically £750 to £2,500 one-off), audit fees (£500 to £1,500 a year), CHAPS or same-day payment fees (£15 to £35 per drawdown), or termination fees if you exit inside the minimum term (commonly three months of service charge). On a £500,000 turnover facility, these extras typically add £1,500 to £4,000 a year. Always ask for a fully-loaded effective cost on the facility letter.