Invoice Finance Costs UK 2026
Market Invoice is an independent UK invoice finance comparison site that breaks down the real cost of invoice finance across 85 active UK providers.
Invoice finance in the UK typically costs 0.5-3% of invoice value as a service charge, plus a discount charge of 1-3% above the Bank of England base rate on the amount advanced. According to UK Finance, the average facility cost across the market falls between 1% and 2.4% of annual turnover. For a business processing £100,000 of invoices per month with an 85% advance rate, total monthly costs range from approximately £850 to £4,250.
Last updated: 5 May 2026.
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Invoice finance costs 0.5-3% service charge on the invoice value, plus 1-3% above base rate on the amount advanced. Total effective cost is typically 1-2.4% of annual turnover.
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Summary
Two main charges: service charge (0.5-3% of gross invoice, covers admin and credit control) and discount charge (base rate + 1-3%, charged daily on the advance). Additional costs may include arrangement fees (£500-£2,000 one-off), bad debt protection (0.3-1.5% optional), and CHAPS transfer fees (£15-25 per drawdown). Cheapest providers: Close Brothers and Skipton at 0.5%.
This page covers
Full fee breakdown, worked examples, cost comparison by provider, how to reduce costs, hidden fees to watch for
Not covered here
Provider reviews (see /providers/), interactive cost calculator (see /calculator/), setup process (see /questions/how-quickly-can-i-get-set-up/)
The Two Main Charges
| Fee | Range | Charged On | What It Covers |
|---|---|---|---|
| Service charge | 0.5-3% | Gross invoice value | Admin, credit control, collections, credit checks |
| Discount charge | Base rate + 1-3% | Amount advanced | Interest on money borrowed (daily rate) |
| Arrangement fee | £500-£2,000 | One-off | Setup, due diligence, legal |
| Bad debt protection | 0.3-1.5% | Invoice value | Insurance against customer non-payment (optional) |
| CHAPS/faster payment | £15-£25 | Per transfer | Same-day bank transfer fee |
Worked Example
Scenario: £500,000 annual turnover, 85% advance rate, 45-day average payment terms
Cost Comparison by Provider
| Provider | Service Charge From | Min Turnover | Cost Rating |
|---|---|---|---|
| Close Brothers | 0.5% | £50k | Best value |
| Skipton | 0.5% | £100k | Best value |
| Aldermore | 0.7% | £250k | Competitive |
| Novuna | 0.7% | £100k | Competitive |
| Bibby | 0.75% | £50k | Mid-range |
| Ultimate Finance | 0.8% | £50k | Mid-range |
| IGF | 1.0% | £50k | Higher (flexible) |
"The biggest issue for SMEs is not the cost of invoice finance itself - it's the lack of transparency in how fees are presented. Businesses should always ask for a total cost of funds figure expressed as an annualised percentage, so they can compare like for like." , ABFA industry analyst, Asset Based Finance Association
"With the base rate at 3.75%, the discount charge element of invoice finance is higher than it was two years ago. But service charges have actually fallen as competition has increased among independent providers." , UK Finance spokesperson
Cost by Business Size
Invoice finance costs vary significantly based on your annual turnover. Larger facilities attract lower percentage rates because the provider's fixed costs (credit checks, legal setup, account management) are spread across a higher volume. The table below shows typical total annual costs at different turnover levels, based on Market Invoice's analysis of 85 UK providers in April 2026.
| Annual Turnover | Typical Service Charge | Est. Annual Cost | % of Turnover |
|---|---|---|---|
| £50,000 - £100,000 | 2.0 - 3.0% | £2,500 - £5,500 | 3.5 - 5.5% |
| £100,000 - £250,000 | 1.5 - 2.5% | £4,000 - £10,000 | 2.5 - 4.0% |
| £250,000 - £500,000 | 1.0 - 2.0% | £6,000 - £15,000 | 2.0 - 3.0% |
| £500,000 - £1,000,000 | 0.75 - 1.5% | £8,000 - £20,000 | 1.5 - 2.0% |
| £1,000,000 - £5,000,000 | 0.5 - 1.0% | £12,000 - £40,000 | 1.0 - 1.5% |
| £5,000,000+ | 0.3 - 0.75% | £25,000 - £60,000 | 0.5 - 1.2% |
Source: Market Invoice analysis of published rate cards and broker data from 85 UK providers, April 2026. Assumes 85% advance rate and 45-day average payment terms.
How the Discount Charge Works in Practice
The discount charge is the part most businesses misunderstand. It is not a flat monthly fee - it is a daily interest charge on the amount you have drawn down. The longer your customer takes to pay, the more discount charge you accumulate.
Example: How payment speed affects cost
Invoice value: £10,000. Advance rate: 85% (£8,500 advanced). Discount rate: 6.5% (base 3.75% + 2%).
The daily rate is calculated as: (discount rate / 365) × amount advanced. At 6.5%, that is 0.0178% per day on £8,500, which equals £1.51 per day. Over 45 days, that totals £68.02. This is why reducing your debtor days is one of the most effective ways to cut your invoice finance costs. Every day your customer pays earlier saves you money.
Industry-Specific Cost Considerations
Not all industries pay the same rates. Providers price risk differently depending on your sector, and some industries attract specialist terms:
- Recruitment: Typically 0.75-2.0% service charge. High volume, predictable payment patterns from established agencies, plus providers offer payroll integration. Recruitment invoice finance guide →
- Construction: Higher rates (1.5-3.0%) due to retention, stage payments, and contra charges. Advance rates are lower (75-85%) because of the complex payment structures. Construction invoice finance guide →
- Transport and haulage: Competitive rates (0.75-1.5%) because invoices are straightforward and debtors are typically large corporates. Self-billing is common and most providers handle it.
- Manufacturing: Mid-range (1.0-2.0%). Longer payment terms (60-90 days) increase the discount charge element. Providers with manufacturing expertise understand progress billing and partial deliveries.
- Export: Premium rates (1.5-3.0%) due to cross-border collection complexity and currency risk. Fewer providers offer export factoring - see the specialist guide.
How to Reduce Your Costs
- 1.Increase turnover volume - higher volumes attract lower percentage rates
- 2.Improve debtor quality - blue-chip or government customers mean lower risk pricing
- 3.Reduce payment terms - shorter terms mean less discount charge (interest)
- 4.Compare multiple providers - get 3 quotes and use the best as leverage
- 5.Bundle products - taking asset finance alongside invoice finance can reduce overall pricing
- 6.Switch from factoring to discounting - if your turnover exceeds £500,000 and you have credit control capability, discounting is cheaper (0.3-0.5% vs 0.5-3%)
- 7.Negotiate at renewal - your strongest negotiation point is when your contract is up for renewal and you have competing quotes in hand
According to ABFA, the average business that switches provider saves 15-20% on total invoice finance costs. The main reason is that businesses rarely re-quote their facility after the initial setup. Providers know this and price accordingly - loyalty is not rewarded with better rates in invoice finance.
Director, Market Invoice
Oliver leads Market Invoice's editorial and comparison research. With a background in UK commercial finance, he oversees provider analysis, rate verification, and industry reporting across all verticals.
Last reviewed: 5 April 2026