Invoice Finance Costs Explained
Invoice finance in the UK typically costs 0.5-3% of invoice value as a service charge, plus a discount charge of 1-3% above Bank of England base rate on the amount advanced. For a business processing £100,000 of invoices per month with an 85% advance rate, total monthly costs range from approximately £850 to £4,250.
Quick Reference
Direct Answer
Invoice finance costs 0.5-3% service charge on the invoice value, plus 1-3% above base rate on the amount advanced. Total effective cost is typically 1-2.4% of annual turnover.
Summary
Two main charges: service charge (0.5-3% of gross invoice, covers admin and credit control) and discount charge (base rate + 1-3%, charged daily on the advance). Additional costs may include arrangement fees (£500-£2,000 one-off), bad debt protection (0.3-1.5% optional), and CHAPS transfer fees (£15-25 per drawdown). Cheapest providers: Close Brothers and Skipton at 0.5%.
This Page Covers
Full fee breakdown, worked examples, cost comparison by provider, how to reduce costs, hidden fees to watch for
Not Covered Here
Provider reviews (see /providers/), interactive cost calculator (see /calculator/), setup process (see /questions/how-quickly-can-i-get-set-up/)
The Two Main Charges
| Fee | Range | Charged On | What It Covers |
|---|---|---|---|
| Service charge | 0.5-3% | Gross invoice value | Admin, credit control, collections, credit checks |
| Discount charge | Base rate + 1-3% | Amount advanced | Interest on money borrowed (daily rate) |
| Arrangement fee | £500-£2,000 | One-off | Setup, due diligence, legal |
| Bad debt protection | 0.3-1.5% | Invoice value | Insurance against customer non-payment (optional) |
| CHAPS/faster payment | £15-£25 | Per transfer | Same-day bank transfer fee |
Worked Example
Scenario: £500,000 annual turnover, 85% advance rate, 45-day average payment terms
Cost Comparison by Provider
| Provider | Service Charge From | Min Turnover | Cost Rating |
|---|---|---|---|
| Close Brothers | 0.5% | £50k | Best value |
| Skipton | 0.5% | £100k | Best value |
| Aldermore | 0.7% | £250k | Competitive |
| Novuna | 0.7% | £100k | Competitive |
| Bibby | 0.75% | £50k | Mid-range |
| Ultimate Finance | 0.8% | £50k | Mid-range |
| IGF | 1.0% | £50k | Higher (flexible) |
How to Reduce Your Costs
- 1.Increase turnover volume — higher volumes attract lower percentage rates
- 2.Improve debtor quality — blue-chip or government customers mean lower risk pricing
- 3.Reduce payment terms — shorter terms mean less discount charge (interest)
- 4.Compare multiple providers — get 3 quotes and use the best as leverage
- 5.Bundle products — taking asset finance alongside invoice finance can reduce overall pricing
Oliver Mackman
Director, Market Invoice
Oliver leads Market Invoice's editorial and comparison research. With a background in UK commercial finance, he oversees provider analysis, rate verification, and industry reporting across all verticals.
Last reviewed: 5 April 2026