Early Payment Discount vs Invoice Finance Calculator UK
A customer offers you 2/10 net 60 (2% discount for paying in 10 days, full payment in 60). The choice is whether to accept the discount or use invoice finance to fund the wait for full payment. The decision turns on the annualised cost of each: convert the discount to an APR equivalent and compare it to your invoice finance rate, then pick the cheaper one. This calculator does that comparison for your own numbers.
| Take the early payment discount | Use invoice finance | |
|---|---|---|
| What you give up | A percentage of the invoice (e.g. 2%) for paying early | An invoice finance fee, keeping the full invoice value |
| How cost is measured | Annualised cost of the discount taken (APR equivalent) | Invoice finance APR on the advance |
| Cheaper when | Discount APR equivalent is below your invoice finance APR | Discount APR equivalent is above your invoice finance APR |
| Tends to win when | The discount is small compared with the days you are paid early | The discount is large compared with the days you are paid early |
Calculator
The invoice finance cost and advance filled in are example inputs, not market rates. Most lenders do not publish their charges, so replace them with your quote. The invoice finance figure is your total charge for this invoice, so include the service charge as well as the discount charge.
Recommendation
Take the discount
Taking the early payment discount is cheaper than invoice finance. The annualised cost of taking the discount is lower than the invoice finance APR.
| Item | Value |
|---|---|
| Discount offered | 2% for paying within 10 days |
| Standard payment period | 60 days |
| Days of payment brought forward | 50 |
| Discount APR equivalent | 14.9% |
| Invoice finance cost (example input) | 2.5% of invoice value |
| Invoice finance APR equivalent (80% advance, example input; 60-day terms) | 19.0% |
| Cheaper option | Take the discount |
Source: Market Invoice early payment discount calculator
Example inputs, not market rates. The discount APR equivalent annualises the 2% given up on the 98% received over the 50 days gained. The invoice finance APR annualises the 2.5% cost on the 80% advanced over 60 days.
View as plain-text Markdown
### Worked example: 2/10 net 60 terms (default calculator scenario) | Item | Value | | --- | --- | | Discount offered | 2% for paying within 10 days | | Standard payment period | 60 days | | Days of payment brought forward | 50 | | Discount APR equivalent | 14.9% | | Invoice finance cost (example input) | 2.5% of invoice value | | Invoice finance APR equivalent (80% advance, example input; 60-day terms) | 19.0% | | Cheaper option | Take the discount | Source: Market Invoice early payment discount calculator Example inputs, not market rates. The discount APR equivalent annualises the 2% given up on the 98% received over the 50 days gained. The invoice finance APR annualises the 2.5% cost on the 80% advanced over 60 days.
Before you decide on rate alone: taking the discount means accepting less for the invoice. Invoice finance keeps the full invoice value but adds a facility, usually with a service charge, a notice period and security over your invoices. If you only need the cash once, the discount may be simpler even if it costs a little more.
What this tool tells you
The tool annualises the discount (what you give up, on what you receive, over the days you are paid early) and the invoice finance cost (your charge for the invoice, on the amount advanced, over the standard payment period). It does not include set-up fees, minimum monthly fees or the cost of any notice period.
The figures above are an illustrative default scenario, not a quote: the rates you are offered depend on your turnover, sector and debtor quality. For real quotes matched to your specific business, use our 60-second comparison tool.
Early payment discount vs invoice finance FAQ
How do I compare an early payment discount with invoice finance?
Convert both to an annualised cost. A 2/10 net 60 discount means giving up 2% to be paid 50 days early; annualised, that 2% on the 98% you actually receive over 50 days works out around 14.9% APR. Compare that to your invoice finance APR. Whichever annualised figure is lower is the cheaper way to bridge the wait.
When is taking the early payment discount the better choice?
When the discount's annualised cost is lower than your invoice finance APR, taking the discount is cheaper. This is more likely when the discount is small compared with the number of days you are paid early, because the cost is spread over more days.
When does invoice finance beat the discount?
When the discount's annualised cost exceeds your invoice finance APR. A large discount over a short window annualises into a high rate: for example 3% for being paid 20 days early works out at about 56% a year. Funding the wait with invoice finance and keeping the full invoice value can then cost less. The calculator flags this automatically.