Invoice Discounting Costs & Fees Explained
Market Invoice is an independent UK invoice finance comparison site that lists 83 UK invoice finance providers in its directory (75 still trading) and compares 27 of them on full published terms.
Invoice discounting has two main charges. A service charge on each invoice, which lenders do not publish (each one quotes per facility). And interest on the money you draw, which UK broker ABC Finance puts at usually 1.5% to 3.5% above the Bank of England base rate, which is 3.75% (since 18 December 2025). In our example below, a business with £1.2m turnover pays about £10,113 a year.
Interest = money drawn x (base rate + margin) / 365 x days until the customer pays, plus a separate service charge on each invoice. More detail + scope
This page covers
Invoice discounting fees in the UK: service charge, interest, the formula, other fees, a worked example, and how it compares with factoring
Not covered here
Invoice finance costs across all products (see /guides/costs/), factoring vs discounting (see /guides/factoring-vs-discounting/), cost over several years (see /tools/lifetime-cost-calculator/)
The two main charges
Service charge. A percentage of each invoice you put through the facility. Some lenders call it a management fee. Lenders do not publish it; each one quotes per facility. It is usually lower for bigger businesses because the lender spreads its costs over more invoices. With invoice discounting you do your own credit control, so you pay less than you would for factoring.
Interest (the discount charge). Charged daily on the money you have drawn, until your customer pays. It is set as a margin above the Bank of England base rate. ABC Finance puts the margin at 1.5% to 3.5% for established businesses, and as high as 4% to 6% for smaller or riskier ones. With the base rate at 3.75%, that is 5.25% to 7.25% a year for an established business. You only pay interest on what you draw.
All the fees in one table
| Fee | Range (ABC Finance, a UK broker) | Charged on |
|---|---|---|
| Service charge | Not published by lenders; quoted per facility | Each invoice |
| Interest | 1.5% to 3.5% above base rate; 4% to 6% for smaller or riskier businesses | Money drawn, daily |
| Set-up fee | £250 to £5,000, depending on facility size | Once, at the start |
| Usage fee | Not given; ask the lender | If your invoices fall below an agreed level |
| Audit fee | Not given; ask the lender | The lender's checks of your sales ledger |
| Early termination fee | Not given; ask the lender | Leaving before the agreed term |
The formula
Interest = money drawn x (base rate + margin) / 365 x days until your customer pays
Plus, separately: service charge = invoice value x service charge %
Interest stops when your customer pays, so how fast your customers pay makes a big difference. On the same drawn balance, customers who pay in 30 days cost about half the interest of customers who pay in 60 days. To turn a quote into a yearly rate you can compare, use our APR equivalent calculator.
Worked example: £100,000 a month
A business invoices £100,000 a month (£1.2m a year). These are example figures, not a quote: a 0.4% service charge, interest at base rate plus 2.5% (6.25% a year), and an average of £85,000 drawn.
- Service charge: £100,000 x 0.4% = £400 a month, £4,800 a year.
- Interest: £85,000 x 6.25% = about £5,313 a year.
- Total: about £10,113 a year, before set-up, audit and other fees.
That is about 0.84% of turnover. Use your own figures in our lifetime cost calculator, which also adds minimum fees and leaving costs.
How to keep the cost down
Get at least three quotes and compare every fee, not just the headline rate. Our quote comparison guide shows how. Ask what happens in a quiet month, and ask whether the set-up fee can be lowered.
If you want the lender to chase your customers, that is factoring, and it costs more: see factoring vs invoice discounting and our invoice finance costs guide. To lower the charges on a facility you already have, see how to negotiate your service charge.
Founder & Managing Director, Muswell Rose, founder and PSC of Best Business Loans Ltd
Adam is the founder and managing director of Muswell Rose and a founder of Best Business Loans Ltd, the company behind Market Invoice. He spent over three years as managing director of Penny, a UK invoice finance business, and his career runs through insurance, mortgages, commercial finance and fintech lending. He writes the Market Invoice library.
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