Invoice Finance Cost Calculator
Estimate invoice finance fees, advance cash, retained balance, discount charge and net receipt for factoring or invoice discounting.
Enter Invoice Finance Terms
Funding Cost Result
Estimated cost of financing this invoice.
What Invoice Finance Changes
Invoice finance turns part of an unpaid invoice into earlier cash. The provider advances a percentage soon after the invoice is raised. When the customer pays, the provider releases the balance after fees and charges. Factoring usually includes credit control by the provider. Invoice discounting may leave customer contact with the business. The calculator focuses on cash and fees: how much arrives first, how much is retained, and how much the facility costs if the customer pays after the entered number of days.
Formula Method
Initial advance = invoice value x advance percentageRetained balance = invoice value - initial advanceService fee = invoice value x service fee percentageDiscount charge = initial advance x annual discount rate x days / 365Bad debt protection fee = invoice value x protection percentageNet receipt = invoice value - all entered fees - customer short paymentThe discount charge is similar to interest on the money advanced while the invoice remains unpaid. The service fee is often charged as a percentage of invoice value or turnover. Some facilities include minimum monthly fees, audit fees, termination fees, CHAPS charges, concentration limits and reserves. Those are not hidden in the calculator. Add known fixed costs to the admin fee or build a separate monthly facility cost check before signing.
Cost Lines To Compare
| Line | What It Means | Question To Ask |
|---|---|---|
| Advance percentage | Cash released before the debtor pays. | Is it applied to gross or approved invoices? |
| Service fee | Facility or administration cost. | Is there a minimum monthly charge? |
| Discount rate | Time-based charge on the advance. | Is it linked to base rate? |
| Recourse terms | Who bears non-payment risk. | When can the provider reclaim the advance? |
| Concentration limit | Exposure to one customer. | Will a large debtor be excluded? |
| Termination fee | Cost to leave the agreement. | What notice period applies? |
Worked Funding Example
A business raises a GBP 12,000 invoice. The facility advances 85%, so the first cash receipt is GBP 10,200. The service fee is 1.5%, or GBP 180. The discount rate is 9.5% per year for 60 days on the advance, which is about GBP 159. The bad debt protection fee at 0.5% is GBP 60 and the admin fee is GBP 75. Total cost is about GBP 474. The net receipt after all fees is about GBP 11,526. The business receives most cash earlier, but pays for that timing improvement.
When The Cost Is Not The Only Question
Invoice finance can be useful when a growing business has to pay wages, suppliers or tax before customers settle invoices. It can be expensive if margins are thin, invoices are disputed, customers pay very slowly or minimum fees apply. It may also affect customer relationships if the provider contacts debtors. Before comparing quotes, check whether the facility is recourse or non-recourse, confidential or disclosed, whole-turnover or selective, and whether your customers meet eligibility rules. Cost should be read beside control, risk and flexibility.
Monthly Facility Checks
A single invoice example can make a facility look cheaper than it is. Ask how fees behave across a quiet month, a busy month and a month with one large customer. Minimum service fees can bite when turnover is low. Concentration limits can reduce funding if one debtor makes up too much of the ledger. Disapproved invoices, credit notes, disputes and aged debts can also reduce availability. Run the calculator for several invoices, then add any monthly minimum or audit fee separately.
Also check whether the provider controls customer contact. Some businesses accept disclosed factoring because it brings credit-control support. Others need confidential invoice discounting because customer relationships are sensitive. If a customer disputes quality, delivery or price, the advance may be reduced or reclaimed even though the original invoice value looked fundable. Ask for a sample monthly statement before signing so the fee language is familiar. Compare the facility with overdraft, loan and early-payment discount options. Ask how notice and exit fees work.
Keep a small funding log with invoice number, customer, advance date, settlement date, service fee, discount charge and any recourse event. The log will show whether the facility is improving cash timing or only moving charges into a statement that is harder to read.
FAQs
What is the advance percentage?
It is the percentage of the invoice paid to the business before the customer settles. The remaining balance is released later after fees and deductions.
Is invoice finance the same as a loan?
It is linked to invoices rather than a standard loan balance, but it still has finance charges and contract terms that need careful review.
What is the discount charge?
It is the time-based cost of the advance, often calculated from an annual rate for the days until the customer pays.
What does recourse mean?
Recourse means the provider may claim money back from the business if the customer does not pay under the agreed terms.
Does the calculator include VAT?
It treats the invoice value entered as the funding base. Check whether your provider calculates advance and fees on VAT-inclusive or net values.
Can this compare two providers?
Yes. Run the same invoice through each quote and add any minimum fees, audit fees or termination charges separately.
Sources
- British Business Bank. (n.d.). Invoice finance. British Business Bank. https://www.british-business-bank.co.uk/finance-options/invoice-finance
- Federation of Small Businesses. (n.d.). Late payments and cash flow guidance. FSB. https://www.fsb.org.uk/
- Small Business Commissioner. (n.d.). Late payment support. GOV.UK. https://www.smallbusinesscommissioner.gov.uk/