CHAPS vs BACS vs Faster Payments - How Will I Get Paid?
Most providers offer CHAPS (same day, £15-25 fee), Faster Payments (same day, free or low cost), or BACS (next working day, usually free). For urgent drawdowns, CHAPS guarantees same-day arrival. For routine weekly funding, Faster Payments or BACS is sufficient and cheaper.
Why This Matters
When you draw down funds from your invoice finance facility, the payment method determines how quickly cash hits your account and what it costs. CHAPS (Clearing House Automated Payment System) settles same-day with guaranteed finality but typically costs £15-30 per transaction. Faster Payments (FPS) also delivers same-day (usually within minutes) with most providers charging nothing or under £5. BACS (Bankers' Automated Clearing Services) takes three working days and is usually free. For a Manchester engineering firm with a £500,000 facility drawing down £80,000 on Monday morning to cover Friday payroll, the difference matters. CHAPS guarantees arrival by 5pm that day. Faster Payments usually arrives in minutes but has a £1 million transaction limit (£250,000 for some banks). BACS means waiting until Thursday, missing payroll. Most invoice finance providers default to Faster Payments for amounts under £250,000, reserving CHAPS for urgent high-value requests. Understanding the mechanics helps you plan drawdowns around cash needs, avoid unnecessary fees, and ensure critical payments like HMRC deadlines or supplier discounts are met. The method also affects when your facility shows as drawn, which matters for interest calculations on flexible facilities where you only pay for what you use.
Key Points
- CHAPS costs £15-30 per transaction, settles same-day with no upper limit, and is irrevocable once processed (typically by 3pm cut-off).
- Faster Payments is free or under £5 with most providers, processes in seconds to minutes, but has a £1 million per-transaction limit (£250,000 with some banks).
- BACS takes three working days (submit Monday, receive Thursday) and is usually free, making it suitable for predictable weekly or monthly drawdowns.
- Most UK invoice finance providers use Faster Payments as default for amounts under £250,000, only charging for CHAPS on explicit request.
- Interest typically starts accruing from the transaction date regardless of settlement method, so BACS does not reduce finance costs despite the delay.
- Some providers impose minimum drawdown amounts (e.g. £5,000) to reduce administrative overhead, making payment method choice less frequent.
- For urgent needs like same-day supplier payments to secure a 2% early settlement discount on a £100,000 invoice, the £25 CHAPS fee pays for itself versus losing £2,000 in discount.
Real-World Example
A Bristol software consultancy with a £300,000 facility at Close Brothers needs £180,000 on Wednesday morning to pay contractors before a client project milestone on Thursday.
They request a Faster Payments drawdown at 9am. Funds arrive in their Lloyds account by 9.15am at no charge. Had they used BACS on Monday, funds would not arrive until Thursday (missing the Wednesday contractor payment). CHAPS would have cost £25 but added no speed advantage over Faster Payments for this amount.
Common Pitfalls
- Assuming CHAPS is the only same-day option and paying £15-30 fees unnecessarily when Faster Payments would settle just as quickly for free.
- Requesting BACS for urgent needs without understanding the three-day settlement cycle, then missing critical payment deadlines.
- Forgetting that Faster Payments has per-transaction limits (often £250,000), then trying to draw down £400,000 in one go and facing rejection or needing to split into two transfers.
- Not checking your own bank's Faster Payments receiving limit, which some business accounts cap at £100,000 or £250,000 per day, forcing you to use CHAPS for larger amounts.
- Drawing down on Friday afternoon via BACS and expecting funds on Monday when banks are closed for a public holiday, resulting in a four or five-day wait.
What to Do Next
- Ask your invoice finance provider which payment methods they offer, their associated fees, and any per-transaction or daily limits on Faster Payments.
- Check your business bank account's Faster Payments receiving limits by calling your bank or reviewing online banking settings, as this varies widely between banks.
- Plan routine drawdowns via BACS or Faster Payments to minimise costs, reserving CHAPS only for genuine same-day emergencies above Faster Payments limits or when settlement certainty is critical (e.g. property deposits, court-ordered payments).
Related Questions
Do I pay interest from the day I request the drawdown or the day the money arrives in my account?
Interest accrues from the transaction date you request the drawdown, not when it settles in your account. Choosing BACS to delay settlement by three days does not reduce your finance cost, it only delays access to cash. Most providers calculate daily interest on the outstanding balance at close of business each day.
Can I use Faster Payments to draw down £500,000 from my invoice finance facility?
Not in a single transaction. Faster Payments has a £1 million system limit but most banks cap individual transactions at £250,000. You would need to split the drawdown into two or three Faster Payments transfers, or use CHAPS which has no upper limit. Check your provider's policy on same-day multiple drawdowns.
If I need £200,000 by 2pm today and my provider offers free Faster Payments, why would I ever use CHAPS?
You would not, unless your own bank's receiving limit blocks Faster Payments above a certain threshold or the provider's Faster Payments service is temporarily unavailable. CHAPS provides guaranteed settlement certainty for time-critical transactions, but Faster Payments is faster and free for amounts within limits. Some providers also use CHAPS for first drawdowns as a risk control measure.
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: 6 April 2026