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 |
| Best for | Small discounts over a wide payment window | Large discounts over a short window |
Calculator
Recommendation
Take the discount
Taking the early payment discount is cheaper than invoice finance. The annualised cost of refusing the discount is lower than invoice finance.
| 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 | 2.5% of invoice value |
| Invoice finance APR equivalent (80% advance, 60-day terms) | 19.0% |
| Cheaper option | Take the discount |
Source: Market Invoice early payment discount calculator
Illustrative default scenario. The discount APR equivalent annualises the 2% given up on the 98% received over the 50 days gained.
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### 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 | 2.5% of invoice value | | Invoice finance APR equivalent (80% advance, 60-day terms) | 19.0% | | Cheaper option | Take the discount | Source: Market Invoice early payment discount calculator Illustrative default scenario. The discount APR equivalent annualises the 2% given up on the 98% received over the 50 days gained.
“The rate comparison assumes you have the cash sitting ready to pay 50 days early. Most businesses weighing this choice do not, which is why the question arises at all. If paying early would drain working capital you need for wages or stock, the cheaper rate can still be the wrong decision: a slightly dearer invoice finance facility that keeps cash in the business may serve you better than a discount you can only just afford to take.”
What this tool tells you
A customer offers you 2/10 net 60 (2% discount for paying in 10 days, full payment in 60). Should you take it, or use invoice finance to fund the wait? This tool compares the cost.
All UK invoice finance providers serve businesses across the full UK. The numbers above are typical UK market rates for early payment discount vs invoice finance UK. 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 (1 to 2%) and the gap between the discount date and the standard payment date is wide, which spreads the cost 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 (for example 3% for paying 20 days early) annualises into a very high rate, so funding the wait with invoice finance and keeping the full invoice value can cost less. The calculator flags this automatically.