Invoice Factoring Costs

How much does invoice factoring cost?

One of the most common questions we get asked is: “How much does invoice factoring cost?”

Unfortunately, there is no single answer to this question.

Whilst you can get a rough indication of potential costs from looking at a funder’s teaser rates, to get a more accurate quote requires more information.

Our factoring quote tool, for instance, will provide an instant indicative quote based on just a few bits of information about your business.

However, with one factoring company’s fee structure typically different to another’s, the answer to the question will depend on the funder you choose, the terms of your agreement, your business and its clients.

We’ve therefore created this guide to help give you a better understanding of the fees and terminology behind a factoring facility. Or get an instant indication of the amount of funding you could release with factoring by using the calculator below:

Typical pricing structure

Most facilities are individually priced depending on your business and the facility you choose, but typically invoice factoring charges consist of two main fees:

Service charge

The service charge covers the ongoing cost of running the facility. In some cases this can include the cost of credit control and bad debt protection, but these are often separated out for additional clarity.

This charge is usually calculated as a percentage of turnover, but it can vary according to the value and volume of invoices you put through the facility.

Discount charge

The discount charge is based on how much money you take from the facility, or funds in use. Accrued daily but deducted at month end, it is usually a percentage above base rate but sometimes above LIBOR, and varies between funders. Some funders operate a minimum base rate, which is over and above base and LIBOR.

Some factoring facilities such as recruitment finance, where the factoring company additionally provides back office and administrative support, might use a composite fee structure. In this case the service and discount charges are effectively combined into a single facility fee, which is the ongoing cost of running the facility and calculated as a proportion of turnover.

Key factors for consideration

All factoring companies price their products in slightly different ways. But, typically, invoice finance costs are calculated based on the volume of invoices to be factored and the collectability of these invoices.

In order to quantify these values, the factoring company may consider:

• How much you will be factoring

• The size of each invoice

• The value of any outstanding invoices

• Your business niche and industry

• Your business reliability, longevity and turnover

• The characteristics of your clients

• Typical payment times

Whilst this offers a rough guide to what your factoring company may consider, it’s worth remembering that different lenders have varying appetites and will put different weight on each of these criteria.

For example, whilst one factoring company may not typically fund businesses in your sector, another may specialise in it.

Therefore, it is wise to find a funder who fully understands your business and its needs in order to access the best rates and service for your requirements.

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Comparing factoring quotes

We hope that this resource has helped to explain factoring fees in more detail.

We always recommend that you get quotes from multiple lenders in order to accurately assess which would be a better fit for your business.

However, given the complexities of invoice factoring fee structures and different lenders offering varying service levels, it can be challenging to accurately compare quotes from multiple lenders and find the best fit for your business.

That’s where we come in. As a specialist invoice finance broker, we will get to know your business and its requirements before introducing the lenders which we feel will be the best fit for your needs.

We’ll then be on hand to help you through the application process and explain any fees or jargon in more detail.

Ultimately our goal is to help you secure the funding that will support your business and allow you to reach your goals.

To see how we could help your business contact us on 0800 9774833 or request a call back and we’ll call you back at a convenient time.

Alternatively, for an instant indication of the type of factoring facility your business could access, get a quote here.

Get a quote

Some of the funders we work with

  • IGF Invoice Finance
  • Nucleus Commercial Finance
  • Tradeplus24
  • Shawbrook Business Credit
  • Santander Corporate & Commercial
  • iwoca
  • Selina Finance
  • Asset Advantage
  • Royal Bank of Scotland
  • Skipton Business Finance
  • Barclays
  • Leumi ABL
  • MaxCap
  • Pulse Cashflow Finance
  • Accelerated Payments
  • Clear Factor
  • Peak Cashflow
  • Nationwide Finance
  • Haydock Finance Ltd
  • Berkeley Trade Finance Ltd
  • Partnership Invoice Finance
  • Blazehill Capital
  • Giant
  • Time Finance
  • Close Brothers Invoice Finance
  • InvoCap
  • Investec
  • Metro Bank SME Finance
  • Secure Trust Bank
  • Davenham Trade Finance
  • Trade Finance Partners
  • Regency Factors
  • inFund
  • Creative Capital
  • FIBR Tech Limited
  • Praetura Invoice Finance
  • Team Factors
  • Merchant Money
  • Boost Capital
  • ABN AMRO Commercial Finance
  • Bibby Financial Services
  • 4Syte
  • Sonovate
  • Roma Finance
  • Optimum Finance
  • Castlebridge
  • Davenham Asset Finance
  • Lloyds Bank Commercial Finance
  • PNC Business Credit
  • MarketFinance
  • Woodsford Tradebridge
  • Ultimate Finance Group
  • Aldermore Invoice Finance

Authorised and regulated by the Financial Conduct Authority (FCA number 730445)
We are a credit broker and not a lender and offer credit facilities from a panel of lenders

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