Invoice Finance Rates 2026 — Updated October 2026
- Discount rate p.a. (base rate 3.75% + 3%–6%)
- 6.75%–9.75%Discount rate p.a. (base rate 3.75% + 3%–6%)
- Service fee as % of annual turnover
- 0.5%–2.5%Service fee as % of annual turnover
- Of invoice value advanced immediately
- Up to 90%Of invoice value advanced immediately
- Last updated
- October 2026Last updated
Invoice finance pricing in 2026 is structured as two separate charges: a service charge (a percentage of turnover) and a discount rate (interest on the amount drawn against unpaid invoices). Together, these form the total cost — which is often higher than it appears from either figure alone. This guide demystifies the dual-pricing model, shows what invoice finance actually costs as an annualised percentage, and compares factoring versus invoice discounting on total cost.
Invoice Finance Pricing — October 2026
Swipe the table sideways to see every column.
| Product / provider type | Service charge | Discount rate | Notes |
|---|---|---|---|
| Whole-turnover factoring (large provider) | 0.5%–1.5% of turnover | BoE + 3%–4.5% (6.75%–8.25%) | Aldermore, Lloyds, Barclays invoice finance. Full collections management included. |
| Whole-turnover factoring (specialist) | 1.0%–2.5% of turnover | BoE + 4%–6% (7.75%–9.75%) | Smaller/newer businesses. Specialist or challenger providers. |
| Invoice discounting (confidential) | 0.3%–1.0% of turnover | BoE + 3%–5% (6.75%–8.75%) | Business retains own collections. Lower service charge. Confidential from customers. |
| Selective / single invoice finance | 1.5%–3.0% per invoice | Included in service charge | Finance specific invoices only. Higher per-invoice cost. Useful for occasional funding. |
| Trade finance (export/import) | 1.0%–2.5% | BoE + 3.5%–6% | Letter of credit and supply chain finance. Typically higher service charge. |
| Bad debt protection add-on (NCID) | 0.3%–0.8% of protected turnover | — | Protects against customer non-payment. Added to service charge. |
What determines your rate
Business turnover
Invoice finance pricing is primarily driven by turnover — the service charge is applied as a percentage of total annual turnover. Larger turnover businesses (above £1m) access more competitive service charge rates as the fixed administrative cost is spread over a larger base.
Customer credit quality
The creditworthiness of your customers (the debtors) determines the quality of the collateral. Invoices to government bodies, large corporations, and creditworthy businesses attract better terms. Invoices to smaller or less creditworthy customers may be excluded from the facility or attract higher rates.
Average invoice value and volume
High-volume, lower-value invoices (many small invoices) cost more to process than low-volume, high-value invoices. The service charge reflects the administrative cost of verifying and chasing each invoice.
Factoring vs discounting
Factoring (where the provider manages collections) is more expensive (higher service charge) but removes the collections workload. Invoice discounting (you manage your own collections) has a lower service charge but you retain the responsibility for chasing payment. Confidential invoice discounting ensures your customers never know you are using invoice finance.
Sector
Some sectors (construction, recruitment) have specific invoice finance products due to the nature of their invoicing and payment cycles. Construction invoice finance must navigate retention and stage payment issues. Recruitment finance accommodates the payroll advance model.
Worked cost example
- Service charge at 1.0% of turnover
- £20,000/year
- Average drawn against facility
- £200,000 at any given time
- Discount rate at BoE+4% = 7.75% p.a.
- £200,000 × 7.75% = £15,500/year
- Total annual cost of invoice finance
- £35,500/year
Real cost calculation: £2,000,000 annual turnover. Average 45-day payment terms. Facility: £300,000.
As % of the average drawn facility (£200,000): 17.75% p.a. effective cost.
As % of turnover: 1.775% of turnover — the "hidden" cost relative to the headline rates.
Context: Improving customer payment terms from 45 to 30 days reduces the drawn amount by approx 33% and cuts the discount charge accordingly.
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Rate context and outlook
Bank Rate is 3.75% after the 17 September hold. Variable business facilities (revolving credit, invoice finance) move only with Bank Rate.
Fixed-rate hire purchase and leases are funded against swap rates, so some funders may nudge fixed pricing up after the September swap move. Quotes are typically held for 30 days.
Reviewed by David Doulton, Director, Doulton Bridging Finance — over 20 years in property finance. Last reviewed 1 October 2026. Doulton Money Ltd t/a Doulton Bridging Finance, FCA No. 814533.
Frequently asked questions
How is invoice finance priced — what does it actually cost?
Invoice finance has two price components: (1) Service charge — typically 0.5%–2.5% of your annual turnover, paid monthly. This covers the administration of the facility, credit control (if factoring), and the use of the credit limit. (2) Discount rate — interest on the amount you draw against unpaid invoices, typically base rate + 3%–6% (currently approximately 6.75%–9.75% p.a.). The total cost is the combination of both — which typically works out at 10%–20% of the drawn amount on an annualised basis.
What is the difference between factoring and invoice discounting?
Factoring: the invoice finance provider manages your credit control and collections — they chase your customers for payment on your behalf. This is disclosed to your customers. Higher service charge but removes the collections workload. Invoice discounting: you manage your own collections — the finance provider simply advances against your unpaid invoices. Confidential (your customers never know). Lower service charge. Suitable for businesses with established credit control functions.
Can start-ups access invoice finance?
Start-ups can access invoice finance, though the terms are typically less favourable. Specialist providers (Fleximize, MarketFinance, Bibby Financial Services) consider start-ups. The key requirement is creditworthy debtors — if your customers are solid businesses (government, corporates), invoice finance is available even for a new business. Service charges are higher for start-ups reflecting the limited track record.
Is invoice finance suitable for all businesses?
Invoice finance is suitable for B2B businesses that issue invoices with payment terms of 14–90 days. It is not suitable for: retail (cash or card sales), businesses with very few large customers (concentration risk), or businesses whose invoices are subject to disputes or retentions (some construction cases). The ideal candidate is a B2B SME with multiple customers, regular invoicing, and predictable payment terms.
Can I exit invoice finance if I no longer need it?
Most whole-turnover invoice finance agreements have a minimum term (typically 12–24 months) and a notice period (typically 3–6 months). Early exit may incur a termination fee. Selective invoice finance (single invoices) has no ongoing commitment. When comparing providers, check the minimum term and exit terms carefully — the cheapest rate with a 24-month lock-in may be less flexible than a slightly more expensive provider with a 12-month term.
Can a new business get finance?
Yes, though many funders want 1–2 years of trading or a larger deposit; directors' personal credit matters more for young businesses.
Is VAT charged on hire purchase?
On HP, VAT is paid upfront with the deposit and can usually be reclaimed; on leases it is added to each rental.
What is a balloon payment?
A larger final payment that lowers the monthly cost; you pay it, refinance it or return the asset, depending on the product.
Do I need to put down a deposit?
Usually 0%–20%, depending on the asset, its age and your trading history.
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Independent whole-of-market advice · FCA No. 814533