The two headline numbers
Every invoice finance quote contains a discount margin and a service fee. The discount margin is interest, quoted as a percentage over a base rate and charged only on the funds you actually draw, day by day. The service fee is a percentage of gross turnover put through the facility, charged whether or not you draw.
Typical UK ranges are a discount margin of 2–4% over base and a service fee of 0.4–2.5% of turnover. Selective and single-invoice facilities are quoted differently, usually as a flat fee of 1.5–4% per invoice for a 30 to 60 day period.
The charges that change the answer
Minimum monthly fees bite hardest on seasonal ledgers: if your quiet months fall below the minimum turnover, your effective rate can double. Arrangement fees run from 0.5% to 1.5% of the facility limit. Credit protection, where offered, adds 0.3–1% of protected turnover.
Then look for audit or survey fees, refactoring or disapproval charges once an invoice ages past 90 days, same-day CHAPS charges per drawdown, and termination notice periods of three to twelve months. A headline-cheap facility with a twelve-month notice period is not cheap.
Working out the real cost
Take annual turnover through the facility, multiply by the service fee, then add the discount margin applied to your expected average drawn balance rather than the facility limit. Add arrangement and ancillary fees, divide by the average funds released, and you have a genuine annualised cost of funds.
A business with GBP 4m turnover, a 1% service fee and an average drawn balance of GBP 500,000 at 8% pays roughly GBP 40,000 plus GBP 40,000 — about 16% on the money actually used, even though the quoted rate looked like 8%.
Is it worth it?
Compare the cost against the alternative. If the facility lets you take early-settlement discounts from suppliers of 2–3%, fund a larger order book, or avoid turning away contracts, it frequently pays for itself. If it is simply covering a structural loss, it will not.
We review quotes line by line before you sign and there are no upfront fees — our charges are due only once funding is in place.
Frequently asked questions
Is invoice finance cheaper than an overdraft?
The headline margin is usually higher than an overdraft, but the facility scales with your sales ledger and is normally available at limits an overdraft would never reach. On a like-for-like drawn basis it is more expensive; on availability it is far more flexible.
What is a minimum monthly fee?
A floor on the service fee, set by assuming a minimum level of turnover. If your actual turnover falls below it you still pay the floor, which sharply raises your effective rate in quiet months.
Can invoice finance charges be negotiated?
Yes. Service fees, minimum fees, notice periods and termination terms are all commonly negotiated, particularly where a ledger is clean and well spread across debtors.
Last reviewed: 2026-08-15