Invoice Finance Costs UK 2026
Market Invoice is an independent UK invoice finance comparison site that breaks down the real cost of invoice finance across 87 UK invoice finance providers.
As of 18 December 2025 the Bank of England base rate is 3.75%. A typical UK invoice finance discount margin is base rate plus 1% to 3% on the amount advanced, plus a service charge of 0.5% to 3% of invoice value. So the discount charge currently runs at roughly 4.75% to 6.75% annualised. Total effective cost for most businesses falls between 1% and 2.4% of annual turnover.
Invoice finance in the UK typically costs 0.5-3% of invoice value as a service charge (an indicative market range stated by UK broker ABC Finance; most lenders publish no service charge and quote per facility), plus a discount charge of 1-3% above the Bank of England base rate on the amount advanced. On our estimates, total cost for most facilities falls between 1% and 2.4% of annual turnover. For a business processing £100,000 of invoices per month with an 85% advance rate, total monthly costs range from approximately £850 to £3,500, assuming each advance is outstanding for about a month.
Base rate as of 18 December 2025.
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Plug in your monthly turnover, invoice value, and payment terms: get an all-in monthly cost estimate.
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. More detail + scope
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
Cost is only one axis. For the full ranking on transparency, advance rate and terms see the best invoice finance companies table, and for a sense of which lenders are most active, the UK Invoice Finance Lender League Table ranks them by live Companies House debentures.
| Provider | Service Charge From | Min Turnover | Cost Rating |
|---|---|---|---|
| Close Brothers | Not published | £750k | Individually priced |
| Skipton | Not published | £100k | Best value |
| Aldermore | Not published | £750k | Competitive |
| Novuna | Not published | Not published | Competitive |
| Bibby | Not published | Not published | Mid-range |
| Ultimate Finance | Not published | Not published | Mid-range |
| IGF | Bespoke (not published) | £5m | Higher (flexible) |
The bigger issue for most SMEs is not the cost itself but how fees are presented. Always ask for a total cost of funds figure expressed as an annualised percentage, so you can compare like for like.
Cost by Business Size
Invoice finance costs vary significantly based on your annual turnover, and on whether you choose invoice factoring (which bundles in collections and so carries a higher service charge) or confidential invoice discounting (cheaper, but you run your own credit control). Larger facilities attract lower percentage rates because the provider's fixed costs (credit checks, legal setup, account management) are spread across a higher volume. The table below shows typical total annual costs at different turnover levels, based on Market Invoice's analysis of the 27 providers with full published terms in April 2026.
| Annual Turnover | Typical Service Charge | Est. Annual Cost | % of Turnover |
|---|---|---|---|
| £50,000 - £100,000 | 2.0 - 3.0% | £2,500 - £5,500 | 3.5 - 5.5% |
| £100,000 - £250,000 | 1.5 - 2.5% | £4,000 - £10,000 | 2.5 - 4.0% |
| £250,000 - £500,000 | 1.0 - 2.0% | £6,000 - £15,000 | 2.0 - 3.0% |
| £500,000 - £1,000,000 | 0.75 - 1.5% | £8,000 - £20,000 | 1.5 - 2.0% |
| £1,000,000 - £5,000,000 | 0.5 - 1.0% | £12,000 - £40,000 | 1.0 - 1.5% |
| £5,000,000+ | 0.3 - 0.75% | £25,000 - £60,000 | 0.5 - 1.2% |
Source: Market Invoice estimates from published rate cards and broker data, April 2026
Assumes 85% advance rate and 45-day average payment terms.
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### Invoice finance cost by annual turnover | Annual Turnover | Typical Service Charge | Est. Annual Cost | % of Turnover | | --- | --- | --- | --- | | £50,000 - £100,000 | 2.0 - 3.0% | £2,500 - £5,500 | 3.5 - 5.5% | | £100,000 - £250,000 | 1.5 - 2.5% | £4,000 - £10,000 | 2.5 - 4.0% | | £250,000 - £500,000 | 1.0 - 2.0% | £6,000 - £15,000 | 2.0 - 3.0% | | £500,000 - £1,000,000 | 0.75 - 1.5% | £8,000 - £20,000 | 1.5 - 2.0% | | £1,000,000 - £5,000,000 | 0.5 - 1.0% | £12,000 - £40,000 | 1.0 - 1.5% | | £5,000,000+ | 0.3 - 0.75% | £25,000 - £60,000 | 0.5 - 1.2% | Source: Market Invoice estimates from published rate cards and broker data, April 2026 Assumes 85% advance rate and 45-day average payment terms.
How the Discount Charge Works in Practice
The discount charge is the part most businesses misunderstand. It is not a flat monthly fee - it is a daily interest charge on the amount you have drawn down. The longer your customer takes to pay, the more discount charge you accumulate.
Example: How payment speed affects cost
Invoice value: £10,000. Advance rate: 85% (£8,500 advanced). Discount rate: 5.75% (base 3.75% + 2%).
The daily rate is calculated as: (discount rate / 365) × amount advanced. At 5.75%, that is 0.0158% per day on £8,500, which equals £1.34 per day. Over 45 days, that totals £60.26. This is why reducing your debtor days is one of the most effective ways to cut your invoice finance costs. Every day your customer pays earlier saves you money.
Industry-Specific Cost Considerations
Not all industries pay the same rates. Providers price risk differently depending on your sector, and some industries attract specialist terms:
- Recruitment: Typically 0.75-2.0% service charge. High volume, predictable payment patterns from established agencies, plus providers offer payroll integration. Recruitment invoice finance guide →
- Construction: Higher rates (1.5-3.0%) due to retention, stage payments, and contra charges. Advance rates are lower (75-85%) because of the complex payment structures. Construction invoice finance guide →
- Transport and haulage: Competitive rates (0.75-1.5%) because invoices are straightforward and debtors are typically large corporates. Self-billing is common and most providers handle it.
- Manufacturing: Mid-range (1.0-2.0%). Longer payment terms (60-90 days) increase the discount charge element. Providers with manufacturing expertise understand progress billing and partial deliveries.
- Export: Premium rates (1.5-3.0%) due to cross-border collection complexity and currency risk. Fewer providers offer export factoring - see the specialist guide.
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 - compare providers and use the best as leverage
- 5.Bundle products - taking asset finance alongside invoice finance can reduce overall pricing
- 6.Switch from factoring to discounting - if your turnover exceeds £500,000 and you have credit control capability, discounting is cheaper (0.3-0.5% vs 0.5-3%)
- 7.Negotiate at renewal - your strongest negotiation point is when your contract is up for renewal and you have competing quotes in hand
Many businesses never re-quote their facility after the initial setup. Providers know this and price accordingly - loyalty is not rewarded with better rates in invoice finance.
Founder & Managing Director, Muswell Rose, founder and PSC of Best Business Loans Ltd
Adam is the founder and managing director of Muswell Rose and a founder of Best Business Loans Ltd, the company behind Market Invoice. He spent over three years as managing director of Penny, a UK invoice finance business, and his career runs through insurance, mortgages, commercial finance and fintech lending. He writes the Market Invoice library.
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