What percentage do factoring companies take?
Factoring companies take two charges. A service charge, usually 0.5% to 3% of the invoice value. And a discount charge, which is interest on the money they advance you, usually 1.5% to 3.5% a year above the Bank of England base rate, and more for small businesses (see the table below). These are the ranges from UK broker ABC Finance. In the example below, the total comes to roughly 2% to 3% of the invoice, depending on how fast the customer pays.
The two charges
Service charge. A percentage of each invoice. It pays for running the facility, checking your customers and, with factoring, chasing payment.
Discount charge. Interest on the money the lender has paid you, worked out daily until your customer pays. The base rate is currently 3.75%, so a margin of 1.5% to 3.5% means 5.25% to 7.25% a year.
How it adds up on one invoice
Example: a £10,000 invoice. The lender pays you 85% (£8,500) and charges a 1.5% service charge (£150). The discount charge is 6.5% a year: base rate plus 2.75%, the margin ABC Finance uses in its own cost example. These are example figures, not a quote.
| Customer pays after | Discount charge | Service charge | Total | Share of the invoice |
|---|---|---|---|---|
| 30 days | £45 | £150 | £195 | 1.9% |
| 60 days | £91 | £150 | £241 | 2.4% |
| 90 days | £136 | £150 | £286 | 2.9% |
The service charge stays the same. The discount charge grows the longer your customer takes to pay.
Smaller businesses pay a higher percentage
ABC Finance publishes typical charges by annual turnover:
| Annual turnover | Typical service charge | Typical discount charge |
|---|---|---|
| £100,000 | 2.0% to 3.0% | Base + 3% to 5% |
| £250,000 | 1.5% to 2.5% | Base + 2.5% to 4% |
| £500,000 | 1.0% to 2.0% | Base + 2% to 3.5% |
| £1,000,000 | 0.75% to 1.5% | Base + 1.75% to 3% |
| £3,000,000+ | 0.3% to 0.75% | Base + 1.5% to 2.5% |
Source: ABC Finance, "Total Cost in Practice" table, checked 11 October 2026.
What else changes your percentage
- Your customers. Customers with a good record of paying are less risk for the lender.
- How fast they pay. Slower payers mean more discount charge, as the table above shows.
- How spread out your sales are. If most of your invoices go to one or two customers, the lender takes more risk.
- Factoring or discounting. Factoring costs more, because the lender chases payment for you (ABC Finance). See factoring vs invoice discounting.
Some single-invoice lenders charge one flat fee instead. Hydr, for example, shows a fee of £118.50 on a £3,000 invoice on its own website (about 4%). See selective invoice finance.
Other fees to ask about
ABC Finance puts set-up fees at £250 to £5,000, depending on the size of the facility. It also mentions early termination, usage and audit fees, without amounts. Ask for the full fee list before you sign. Our costs guide covers every fee, and the calculator estimates the total for your figures.
Common questions
Is the percentage taken from the whole invoice or the advance?
The service charge is a percentage of the whole invoice. The discount charge is interest on the advance only, for as long as the invoice is unpaid.
Why do smaller businesses pay a higher percentage?
ABC Finance's table shows service charges of 2% to 3% at £100,000 turnover and 0.3% to 0.75% at £3m and above.
Do factoring companies charge other fees?
Often, yes. ABC Finance lists set-up fees of £250 to £5,000. Ask for the full list of fees before you sign, including any minimum monthly charge, payment fees and fees for leaving early.
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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