United Kingdom. Invoice finance for businesses
What does invoice factoring actually cost?
Factoring is quoted as two percentages and invoiced as about five charges, which is why the headline rate and the annual cost are rarely the same conversation. The service fee is charged on turnover, the discount margin on the money you draw, and everything else sits underneath: minimum fees, audit fees, refactoring charges and the cost of leaving. Put your own numbers in and see the total, then compare quotes on that rather than on the rate.
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What a UK invoice factoring facility charges for, 2026
Last updated
Providers quote a service fee and a discount margin. Agreements bill more than that, and the extra lines are where two identical-looking quotes diverge. This table names every charge, what it is levied on, and the question that settles it.
The Bank Rate figure is the Bank of England's published rate, 3.75% effective 18 December 2025, read on 15 August 2026 and cited below. Nothing else here is a price: no service fee, margin or fee level is quoted, because invoice finance is priced per ledger and no public source publishes a market rate. Publishing an illustrative one would put a figure on this page that no provider is bound by. What the table gives instead is the complete list of what gets charged and the wording to ask for, so that quotes can be compared line for line rather than on two headline percentages.
| Charge | What it is levied on | Why it varies | What to ask, in writing |
|---|---|---|---|
| Service fee | A percentage of turnover put through the facility | Falls with volume, rises with ledger admin and customer count | Is it on gross invoice value including VAT, or net? |
| Discount margin | The average balance drawn, over a base rate | Debtor quality, sector, concentration | Is the margin over Bank Rate or your own base rate? |
| Advance rate | Sets how much you draw, so it drives the discount charge | Debtor spread and dilution history | What advance rate, and can it be reduced during the term? |
| Minimum fee | Charged where turnover does not generate enough service fee | Set at agreement, often annually | What is the annual minimum and what happens in a quiet quarter? |
| Refactoring charge | Invoices unpaid beyond an agreed period | The ageing of your ledger | At what age does refactoring bite, and at what rate? |
| Audit fee | Periodic ledger audits by the provider | Facility size and risk appetite | How often, and what does each audit cost? |
| Transfer and CHAPS fees | Each same-day payment out | Per transaction | What is the per-payment charge, and is BACS free? |
| Termination and notice | Exit before the end of the term or notice period | Contract term and notice length | What is the notice period, and what does early exit cost? |
- The Bank of England's Bank Rate has been 3.75% since 18 December 2025, down from 4.00% in August 2025 and 4.25% in May 2025.
- Discount is charged on the average balance drawn rather than on turnover, so debtor days and advance rate drive that cost as much as the margin does.
- An annual minimum fee overrides the service fee calculation entirely when turnover falls short, which is what catches seasonal businesses.
- Refactoring charges attach to invoices unpaid beyond an agreed age, so a lengthening ledger raises the cost of the facility without any rate changing.
- Recourse and non-recourse facilities are different products: only the second carries bad debt protection, and it is priced accordingly.
Cite this page
“What a UK invoice factoring facility charges for, 2026”, Invoice Factoring Cost, https://invoicefactoringcost.co.uk/ (updated 2026-08-15). The Bank Rate figure is the Bank of England's published rate, 3.75% effective 18 December 2025, read on 15 August 2026 and cited below. Nothing else here is a price: no service fee, margin or fee level is quoted, because invoice finance is priced per ledger and no public source publishes a market rate. Publishing an illustrative one would put a figure on this page that no provider is bound by. What the table gives instead is the complete list of what gets charged and the wording to ask for, so that quotes can be compared line for line rather than on two headline percentages.
Want quotes on your actual ledger?
The real cost depends on your debtor book, your sector and who your customers are. Tell us the shape of it and invoice finance brokers will quote against it.
Go deeper
Each one cites where its numbers come from.
Factoring or invoice discounting: which one you are buying
Factoring includes credit control and your customers know. Discounting is confidential and you chase. The cost and the control differ.
The charges that are not the service fee or the margin
Minimum fees, refactoring, audit fees, CHAPS charges and notice periods. Where two identical-looking factoring quotes stop being comparable.
Is invoice factoring regulated, and what protects you
Business invoice finance sits largely outside FCA regulation. What that means for complaints and compensation, and how to check a provider.
The basis
- The discount margin is applied over the Bank of England's Bank Rate, which has been 3.75% since 18 December 2025 (Bank of England). Some agreements sit over a provider's own base instead, which you cannot track independently; ask which yours uses.
- Discount is charged on the average balance DRAWN, not on turnover. The calculator derives that from your turnover, your debtor days and your advance rate, which is the arithmetic providers use and the step most cost comparisons skip.
- No service fee or margin level is published here as typical. Invoice finance is priced per ledger against your customer base, your sector and your debtor quality, and no public source sets a rate, so the defaults above are round numbers to edit rather than a market benchmark.
- The minimum fee applies where your turnover does not generate enough service fee to reach it. It is the difference between a facility that flexes with your business and one that does not, and it is the most common source of an unexpected invoice.
- Not modelled: bad debt protection (recourse versus non-recourse), which is a genuinely different product, and any charge for a notice period on exit. Both belong in your total before you sign.
Invoice Factoring Cost is an independent introducer site operated by Ellul Solutions Ltd. We are NOT authorised or regulated by the Financial Conduct Authority, and we are neither a lender nor a broker. We do not advise, arrange or recommend any facility, product or provider: we introduce you to invoice finance providers and brokers by passing your details to them, and they deal with you directly. We may be paid a commission for that introduction by the firm we introduce you to, and it never changes what you are quoted. Nothing here is financial, legal or tax advice. No service fee or margin level is published on this site because invoice finance is priced per ledger and no public source sets a market rate; the calculator's defaults are round numbers to edit, not benchmarks. Invoice finance to a business is normally outside FCA regulation, so the Financial Ombudsman Service and Financial Services Compensation Scheme may not be available to you; check any provider on the FCA's Financial Services Register before sending a sales ledger or signing anything.
Common questions
How much does invoice factoring cost?
It is charged as at least two things and usually about five. A service fee as a percentage of turnover put through the facility, a discount margin over a base rate charged on the average balance you have drawn, and then minimum fees, refactoring charges, audit fees and transfer charges underneath. We publish no typical rate because invoice finance is priced per ledger against your customers, sector and debtor quality and no public source sets one. Use the calculator with your own numbers and compare quotes on total cost as a percentage of turnover.
Is the discount charge based on my turnover?
No, and this is the step most cost comparisons skip. Discount is charged on the average balance you actually have drawn, which depends on your turnover, how long your customers take to pay and your advance rate. A business with 30 day debtor days draws far less on average than one with 75, on identical turnover, and pays proportionally less discount. The calculator derives that balance for you rather than applying a rate to turnover.
What is the difference between factoring and invoice discounting?
Under factoring the provider runs your sales ledger and collects from customers, who are notified. Under discounting you keep collections and the facility is normally confidential. Factoring usually carries a higher service fee because you are buying a credit control function with the funding, which can make it cheaper overall for a business that would otherwise employ someone to chase. Discounting typically requires a larger, more established business with better reporting.
What is a minimum fee and why does it matter?
An annual floor on the service fee. Where your turnover does not generate enough to reach it, you pay it anyway, so a variable cost becomes fixed in exactly the year you would want it to flex. It is the most common source of an unexpected invoice for seasonal businesses. Size it against your worst plausible year rather than your forecast, and enter it in the calculator to see where your total stops falling.
What is refactoring?
A further charge, or recourse back to you, on invoices still unpaid beyond an agreed age. It is a reasonable protection for the provider, and its effect is that a lengthening ledger increases what the facility costs you without any rate changing. Ask at what age it applies and at what rate, then compare that with your actual debtor days rather than your stated payment terms, because the two are rarely the same.
Is invoice factoring regulated by the FCA?
Mostly not. It is lending to a business against trade receivables, and UK consumer protections broadly attach to individuals rather than to companies. That means the Financial Ombudsman Service and Financial Services Compensation Scheme routes may not be open to you and your protection is the agreement itself. Many providers are nonetheless authorised firms for other activities, and any firm can be checked free on the FCA's Financial Services Register.
What should I check before signing?
Four things, in writing. The contract term and the notice period, because a twelve month term with three months' notice is a fifteen month commitment. What early termination costs. Whether the provider can reduce your advance rate or impose reserves during the term. And what happens to the assignment of your debts if you terminate, if a customer disputes an invoice, or if the provider is acquired.
Sources
Price your own ledger, then compare
Service fee, discount on the balance actually drawn, minimum fee and the extras, as one annual number and one percentage of turnover.
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