Service fee (invoice finance)

Service fees vary widely depending on the type of invoice finance and the level of work the lender does. A full disclosed factoring facility, where the lender chases customers directly, will carry a service fee at the higher end of the range because credit control is labour-intensive. Confidential invoice discounting, where the business runs its own credit control and the lender just monitors the ledger, sits at the lower end.

Service fees are almost always charged on gross invoiced turnover put through the facility, not on funds advanced. That means a business that invoices £2 million a year on a 0.6 per cent service fee will pay around £12,000 a year regardless of how heavily it draws. Combined with the discount fee, the service fee is what makes a like-for-like comparison between invoice finance and other working-capital products possible.

When comparing UK invoice finance quotes, ask whether the service fee includes online statements, bad-debt protection, debtor concentration reporting, and out-of-pocket costs such as legal fees on overdue invoices. Some providers bundle these in; others charge separately, which can materially inflate the all-in cost.