How Do Invoice Finance Companies Make Money?

Two ways: a service charge, typically a percentage of each invoice or of turnover, and a discount charge (interest) on the amount advanced, calculated daily until your customer pays. Some providers also charge arrangement fees, annual review fees and payment transfer fees.

The Two Core Revenue Streams

Service charge (typically 0.5-3%): A percentage of each invoice value or of turnover. This is the management fee - it covers credit checking your customers, running the platform, processing payments, and (with factoring) credit control. Higher for smaller businesses, lower for larger facilities.

Discount charge (interest): Calculated daily on the amount advanced to you, at an agreed margin above base rate. This is how the provider earns a return on the capital they have lent you. The longer your customer takes to pay, the more interest accrues - which is why providers care about your customers' payment habits.

The Ancillary Charges

Arrangement fees (one-off, at setup). Annual review or re-documentation fees. CHAPS or faster payment charges per drawdown. Credit check fees per new customer. Minimum monthly charges even when you are not using the facility. Not all providers charge all of these - but many do. Always ask for the full schedule.

Why It Works for Them

Invoices are good security. Unlike a business loan, the provider is lending against a specific asset - money owed by a named customer. If the customer is creditworthy, the risk of loss is low. That makes it a relatively safe lending model, which is why so many UK providers compete for your business.