Invoice Financing Costs

Invoice Financing costs vary from business to business but are broadly split into the following categories:

 

Arrangement Fee / Survey Cost 

Some lenders will charge a fee to carry out due diligence, known as a survey and there may also be an arrangement fee, which is the cost of setting up the facility. Some will also charge a small annual renewal fee thereafter.

 

Service Fee 

The Invoice Financing Costs include a service fee for the day to day administration of the facility, usually charged as a percentage of the gross invoice value but sometimes this can be a pre-agreed fixed monthly amount. When this is charged as a percentage, there is often a minimum monthly charge agreed at the outset.

 

Discount Fee 

This is calculated as a percentage of the total funds you borrow.

 

Ancillary costs

Some invoice finance companies will charge additional ancillary fees, which can include CHAPS payment charges for when you need to draw down funds on the same day.

 

Contact us to speak to one of our experts and find out if we can match your expectations about Invoice Financing Costs, and to see if Invoice Finance is the right solution for your business.

Invoice financing is a form of short-term money borrowing which is related to the invoices your business has issued to your clients. Invoice Financing costs can be complicated and vary from business to business or the route you choose to go down.

Invoice Financing has no standard cost. Depending on the business, how well it’s performing, how many outstanding invoices the business has… Each factor can alter and change the cost of invoice financing.

Typically, lenders will offer a Flat Fee Structure depending on two things; the length of borrowing period and the discount/ factor rate. Often this will be between 1.5% and 5%. The more invoices you claim invoice financing for the lower the discount rate will be.

There are a variety of invoice financing costs that are explained in more detail below.

With a flat fee structure, there’s a one-off, upfront fee. The length of factoring period does not affect the fee total.

Invoice financing is a great way to help SMEs stay above water. Consider this example: Imagine your business is owed £20,000 by a client in 30 days, but you need money in the meantime to continue supporting or investing in your business. With a 1% service fee and a 3% discount rate, for example, the total cost for factoring your £20k invoice over 30 days is around £238.40. So, with invoice financing, you can receive your money now and start using it to develop your business.

Remember that invoice financing should be used as a support, not a lifeline for a business.

At Ignite Business we understand the importance of financial freedom for SMEs and chasing debts and invoices can tie up your business’ progress. For many businesses a lack of fluid finances can be incredibly stressful and debilitating. That is why, at Ignite Business Group we aim to help you find the best invoice financing solutions as quickly as possible.

Contact us now to speak to one of our experts. Find out if we can match your expectations about Invoice Financing Costs, and to see if Invoice Finance is the right solution for your business.