Invoice Finance APR Equivalent Calculator UK
This calculator converts a quoted invoice finance facility into a single true APR equivalent, so you can compare it directly against a business loan or credit line. It combines a service charge percentage with a discount charge above the Bank of England base rate, annualising the service charge over your actual debtor days and the cash advanced. On the default example (0.7% service charge, 60 debtor days, 80% advance rate, 2% discount margin over the current 3.75% base rate), the true APR equivalent comes out at 11.1%, comparable to a mid-tier UK business loan. Below 8% it is rated cheaper than a typical loan, 8 to 12% mid-tier, 12 to 18% comparable to higher-rate business credit, and above 18% expensive.
Calculator
True APR equivalent
11.1%
Invoice finance at this cost is comparable to a mid-tier UK business loan. Worth considering when the cash flow benefit (faster growth, lower bad debt) is genuine.
| Item | Value |
|---|---|
| Service charge | 0.7% of turnover |
| Discount margin | 2.0% above BoE base (3.75%) |
| Average debtor days | 60 |
| Advance rate | 80% |
| Service charge annualised on cash advanced | 5.3% |
| Total discount charge | 5.75% |
| True APR equivalent | 11.1% |
| Comparable to | Mid-tier business loan |
Source: Market Invoice APR equivalent calculator, base rate 3.75%
Illustrative default scenario. APR equivalent = service charge annualised over debtor days on the cash actually advanced, plus the full discount charge.
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### Worked example: 0.7% service charge, 60 debtor days (default calculator scenario) | Item | Value | | --- | --- | | Service charge | 0.7% of turnover | | Discount margin | 2.0% above BoE base (3.75%) | | Average debtor days | 60 | | Advance rate | 80% | | Service charge annualised on cash advanced | 5.3% | | Total discount charge | 5.75% | | True APR equivalent | 11.1% | | Comparable to | Mid-tier business loan | Source: Market Invoice APR equivalent calculator, base rate 3.75% Illustrative default scenario. APR equivalent = service charge annualised over debtor days on the cash actually advanced, plus the full discount charge.
“An APR equivalent leaves out the fees that often decide the real cost: minimum monthly service charges, setup and renewal fees, and CHAPS or same-day payment charges. On a small ledger the minimum fee can dominate, so a facility with a lower APR equivalent can cost more in pounds than one with a higher rate. Compare total pounds paid per year for your actual volume, not just the percentage.”
What this tool tells you
Translates a quoted invoice finance facility (service charge % + discount charge) into a true APR equivalent so you can compare to a business loan or credit line on the same basis.
The figures above are an illustrative default scenario, not a quote: the rates you are offered depend on your turnover, sector and debtor quality. For real quotes matched to your specific business, use our 60-second comparison tool.