What does it cost to borrow against my invoices?

2 min read

Service feeFor running the facility

Discount chargeLike interest on the advance

Payment speed mattersSlow debtors cost more

Compare over a periodNot one fee

How the cost is built

Borrowing against invoices — invoice finance — is priced with two charges: a service fee for running the facility (a percentage of turnover or a fixed amount), and a discount charge that works like interest on the funds advanced against each invoice for the time it is outstanding. Together they make the cost, which is why no single fee tells the whole story. See how invoice finance costs.

What drives it up

The discount charge rises the longer your customers take to pay, because the advance is out for longer. So slow debtors make the facility dearer and tight credit control makes it cheaper — chasing invoices promptly is a direct cost saving here. The service fee reflects your ledger's size and admin. A business with clean, quick-paying customers pays materially less than one with a slow, messy ledger. See chasing invoices.

Judging value

Because the charges differ from a loan's, compare the cost over a representative period — say a typical quarter — given your real debtor days, and weigh that total against the value of the cash arriving early. For a business waiting weeks on invoices, the cost can be well worth the improved cash flow. See factoring vs discounting and compare on the true cost calculator.

Lower the cost by tightening credit control, and to explore a facility, apply.

Frequently asked questions

Is borrowing against invoices cheaper than a loan?

It depends on usage and how fast your customers pay. Priced as a service fee plus a discount charge on the advance, it can be very cost-effective for a business with steady, reasonably quick-paying invoices, and dearer for one with slow debtors. Compare the total cost over a representative period against a loan's total repayable rather than assuming one is always cheaper — the right answer depends on your ledger.

How can I reduce the cost of invoice finance?

Tighten credit control so customers pay faster — the discount charge accrues for as long as the advance is outstanding, so quicker payment directly lowers the cost. Chasing overdue invoices, setting clear payment terms and invoicing promptly all help. Choosing the right facility type for your ledger and only factoring the invoices you need to also keeps the service and discount charges down.