BoE Base Rate: 4.50% (since 6 February 2025)

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

FeeRangeCharged OnWhat It Covers
Service charge0.5-3%Gross invoice valueAdmin, credit control, collections, credit checks
Discount chargeBase rate + 1-3%Amount advancedInterest on money borrowed (daily rate)
Arrangement fee£500-£2,000One-offSetup, due diligence, legal
Bad debt protection0.3-1.5%Invoice valueInsurance against customer non-payment (optional)
CHAPS/faster payment£15-£25Per transferSame-day bank transfer fee

Worked Example

Scenario: £500,000 annual turnover, 85% advance rate, 45-day average payment terms

Monthly invoices£41,667
Amount advanced (85%)£35,417
Service charge (1.5%)£625/month
Discount charge (base + 2% = 6.5% on £35,417 for 45 days)£284/month
Total monthly cost£909/month
Effective annual cost£10,908/year (2.2% of turnover)

Cost Comparison by Provider

ProviderService Charge FromMin TurnoverCost Rating
Close Brothers0.5%£50kBest value
Skipton0.5%£100kBest value
Aldermore0.7%£250kCompetitive
Novuna0.7%£100kCompetitive
Bibby0.75%£50kMid-range
Ultimate Finance0.8%£50kMid-range
IGF1.0%£50kHigher (flexible)

How to Reduce Your Costs

  1. 1.Increase turnover volume — higher volumes attract lower percentage rates
  2. 2.Improve debtor quality — blue-chip or government customers mean lower risk pricing
  3. 3.Reduce payment terms — shorter terms mean less discount charge (interest)
  4. 4.Compare multiple providers — get 3 quotes and use the best as leverage
  5. 5.Bundle products — taking asset finance alongside invoice finance can reduce overall pricing
OM

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

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Invoice Finance Cost FAQ

What is the cheapest invoice finance provider?

The cheapest invoice finance providers in the UK for 2026 are Close Brothers and Skipton Business Finance, both starting from 0.5% service charge. However, the cheapest provider for your business depends on your turnover, industry, and debtor quality.

Are there hidden fees with invoice finance?

Common additional fees to watch for include: arrangement fees (£500-£2,000 one-off), early termination fees (if you leave before minimum term), minimum service charges (monthly minimums regardless of invoice volume), and CHAPS/faster payment fees for each drawdown.

Is invoice finance cheaper than an overdraft?

It depends. A standard business overdraft typically costs 3-8% EAR. Invoice finance effective annual cost ranges from 5-15% depending on how quickly your invoices are paid. For businesses that cannot get an overdraft, invoice finance may be the only option regardless of cost.

Can I negotiate invoice finance fees?

Yes. The main negotiation levers are: higher turnover volume gets lower rates, better debtor quality reduces risk pricing, longer contract commitment can reduce fees, and bringing multiple products (asset finance + invoice finance) gives leverage.