What it costs

Invoice finance (invoice factoring and invoice discounting) is more flexible than traditional bank funding. Fees differ from business to business and most lenders offer individual bespoke packages tailored to your specific needs.

Generally, there are two fee components:

> Service fee.
> Interest.

The service fee is charged to cover the daily running costs of the sales ledger and the provision of the facility, charged on a percentage of the funds advanced to you.

The interest charge is based on the money advanced to you.

When starting to use invoice finance for the first time, the lender will charge a “Retro”fee, which will relate to the existing outstanding invoices that are taken over. However, funds relating to these existing invoices will be immediately released. Sometimes a lender may also charge an arrangement fee. Compare Factoring can assist with the negotiation of fee levels.

When looking at the costs, you must take into consideration the savings you will make when using an invoice finance facility. These will include staff expenditure (as the lender will manage your credit control) and other office costs.