Invoice finance: what advance percentage and fees should I expect?

Short answer: Expect advance rates typically from 70%–95% of each invoice depending on the product and debtor quality — most UK businesses see around 75%–85% on factoring and 80%–95% on discounting. Fees are a combination of a discount charge (effectively interest) — commonly 0.5%–3.0% of invoice value per month — plus administration, setup, facility and optional credit protection fees. Exact terms depend on your customers’ credit, sector, debtor concentration and the facility type. If you’d like tailored options, get a Free Eligibility Check now.

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Quick summary: what invoice finance covers

Invoice finance unlocks cash tied up in unpaid B2B invoices. The two main approaches are:

• Factoring (disclosed): a funder takes responsibility for sales ledger management and pays you a portion of each invoice up front.
• Invoice discounting (confidential): you retain control of the ledger and customer relationships; the funder advances against invoices confidentially.

There are also single‑invoice (spot) facilities, whole‑ledger vs selective arrangements, and recourse vs non‑recourse options (non‑recourse gives some bad‑debt protection). Businesses typically use invoice finance to smooth cashflow, manage rapid growth, cover seasonal peaks, or free working capital for investment.

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Typical advance percentages

Advance percentage = the share of the invoice value the funder pays up front. It is expressed as a percentage of the gross invoice.

Advance rate ranges by product type

Product	Typical advance rate
Invoice factoring (traditional, disclosed)	70% – 90% (commonly ≈ 80%)
Invoice discounting (confidential)	80% – 95% (higher for blue‑chip debtors)
Spot / single invoice funding	70% – 85%
Non‑recourse factoring (with bad‑debt cover)	70% – 85% (often lower advance)

What affects the advance rate?

• Debtor credit quality: invoices to large, blue‑chip companies earn higher advances than to small, high‑risk buyers.
• Sector risk: construction, hospitality or seasonal trades are often regarded higher risk and may attract lower advances.
• Debtor concentration: if a few customers make up most of your ledger, lenders usually reduce advance rates to limit exposure.
• Invoice age & disputes: older or disputed invoices reduce advance or may be excluded.
• Currency & export risk: foreign currency or export invoices usually lower advances or require extra fees.

UK Business Loans matches your profile to lenders/brokers who specialise in your sector and debtor profile — that improves your chance of securing a higher advance.

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Common fees and charges explained

Invoice finance pricing is usually a bundle of several charges. Always ask for a full cost schedule showing an example for a 30‑ and 60‑day debtor cycle.

Typical fees — what to expect

Fee type	Typical range	What it covers
Discount charge / interest	0.5% – 3.0% per month	Core cost for funding an invoice; effectively the interest for days funded
Service / administration fee	0.25% – 2.5% of invoice or £5–£20 per invoice	Bookkeeping, reconciliations and debtor management (factoring)
Arrangement / set‑up fee	One‑off 0.5% – 2% of facility or £250–£1,500	Legal and credit checks to open the facility
Facility / renewal fee	0.25% – 1% annually	Fee for maintaining the line
Non‑recourse / credit cover	0.1% – 1.5% of invoice value	Extra premium if the lender assumes bad‑debt risk
Audit / compliance fee	£250 – £1,000	Due diligence especially for discounting
Minimum monthly fee	£50 – £200	Typical for smaller clients

Discount charges are charged only for the time an invoice is funded. If your debtor pays in 30 days, your monthly cost is near the low end; if payment takes 90 days the cost multiplies. Always request an APR equivalent or 30/60 day worked examples for transparency.

Worked examples

Here are two plain‑English examples so you can see the cashflow impact.

Example 1 — Typical factoring (smaller invoice)

• Invoice value: £10,000
• Advance: 80% → upfront payment £8,000
• Discount charge: 1.0% for 30 days → £100 (10,000 × 1.0%)
• Admin fee: 0.5% → £50
• On collection (when debtor pays): funder returns residual: £2,000 minus fees (£150) = £1,850
• Total cash received by business = £8,000 (upfront) + £1,850 (residual) = £9,850
• Total cost = £150 → effective cost ≈ 1.5% for a 30‑day cycle

Example 2 — Invoice discounting (larger invoice, confidential)

• Invoice value: £50,000
• Advance: 90% → upfront payment £45,000
• Discount charge: 0.75% for 30 days → £375
• Assume admin fee £100
• Residual paid on collection: £5,000 − £475 = £4,525
• Total cash received = £45,000 + £4,525 = £49,525
• Total cost = £475 → effective cost ≈ 0.95% for a 30‑day cycle

These examples illustrate: higher advance means more immediate cash, but fees differ by product type and the lender’s pricing model.

How advance & fees are negotiated — what lenders look for

Lenders and brokers underwrite holistically. Typical checks include:

• Company accounts, bank statements and management accounts
• Sales ledger and aged debt analysis (usually 6–12 months)
• Debtor credit checks (who the invoices are issued to)
• Sector and contract risk
• Any previous defaults, CCJs or chargeable encumbrances

How to improve terms:

• Target higher‑credit customers, or secure contracts with blue‑chip buyers
• Reduce debtor concentration (spread sales across more customers)
• Clear disputes rapidly and tighten payment terms
• Provide good bookkeeping and proof of prompt invoicing

Brokers can sometimes negotiate better pricing by packaging your application to the right funder. UK Business Loans connects you quickly to brokers and lenders who specialise in specific sectors and facility types.

Hidden costs and common pitfalls to avoid

• Unclear minimum monthly fees that eat margin for low invoice volumes.
• Compulsory security over business assets not disclosed up front.
• Excessive per‑invoice admin charges or “management” fees added later.
• Contract clauses that permit sweeping other account balances.
• Automatic renewals or onerous termination penalties.

Always ask for a worked example showing total cost for a typical 30‑ and 60‑day debtor cycle, and request a complete fee schedule in writing.

Why use UK Business Loans to compare invoice finance

We don’t lend — we match. UK Business Loans helps businesses (minimum finance needs from about £10,000) reach lenders and brokers who will consider your circumstances quickly. Our advantages:

• Fast matching to specialist lenders and sector‑experienced brokers
• Confidential approach for businesses that prefer invoice discounting
• Time saved — one simple enquiry matches you to the most suitable partners

Want comparisons from multiple providers without repeating yourself? business finance options can be complex — we can introduce you to firms who will give tailored quotes. Get Quote Now

We introduce your enquiry to selected lenders and brokers. We are not a lender and do not provide regulated financial advice. Completing the form is free and creates no obligation.

Practical checklist before you apply

• Latest 6–12 months debtor ledger (by customer)
• Recent management accounts and bank statements
• List of top 10 customers and credit terms
• Aged debt report and details of any disputed invoices
• Information on any existing borrowing or charges

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Frequently asked questions

How quickly will I receive funds?

Once a funder approves the facility, many lenders can release funds within 24–72 hours for straightforward cases. Complex cases that need audits or extra legal checks can take longer.

Will invoice finance affect my customer relationships?

Factoring is usually disclosed to your customers (the funder manages collections). Invoice discounting can be confidential so your customers may not be aware of the funding.

Do I need to have good credit?

Lenders focus more on your customers’ creditworthiness than on your business credit. However, your company’s trading history, aged debts and any adverse records still influence pricing and terms.

Is invoice finance expensive compared with other options?

Cost depends on your alternatives. For businesses with long debtor days or rapid growth, invoice finance can be cheaper and more flexible than high‑cost overdrafts or short‑term loans — but always compare total cost.

Will applying hurt my credit score?

Submitting an enquiry through us does not affect your credit score. Lenders or brokers may undertake checks later when you proceed.

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Next steps — get a free quote

Ready to see specific advance rates and a full cost illustration for your invoices? Complete a short enquiry and we’ll match you to lenders and brokers who can provide tailored quotes for your sector. It takes a couple of minutes and creates no obligation.

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We introduce your enquiry to selected lenders and brokers. UK Business Loans is not a lender and does not give regulated financial advice. Completing this form is free and creates no obligation.

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Content by: James Ellis, Head of Finance Partnerships, UK Business Loans. James has 12 years’ experience matching UK SMEs with specialist lenders and brokerage partners. Published: 01 Nov 2025. Last updated: 01 Nov 2025.

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1. What advance percentage can I expect with invoice finance in the UK?
Typical advance rates range from about 70%–95% of each invoice depending on product and debtor quality (commonly ~75%–85% for factoring and 80%–95% for discounting).

2. What fees and charges should I expect with invoice finance?
Expect a discount charge (0.5%–3.0% per month) plus service/administration fees, arrangement/setup fees, facility or renewal fees and optional non‑recourse/credit cover premiums.

3. What’s the difference between factoring and invoice discounting?
Factoring is usually disclosed and includes ledger management by the funder, while invoice discounting is confidential and lets you retain control of customer relationships.

4. How quickly can I receive funds with invoice finance?
Once approved, many lenders can release funds within 24–72 hours for straightforward cases, although complex deals requiring audits or legal checks can take longer.

5. Will invoice finance affect my customer relationships?
Factoring is typically disclosed to customers because the funder handles collections, whereas invoice discounting can be confidential so customers may not know.

6. Can startups or businesses with poor credit access invoice finance?
Yes—many providers focus more on your customers’ creditworthiness than your business credit, and specialist lenders or brokers can help startups or firms with imperfect credit.

7. Is invoice finance cheaper than a business loan or overdraft?
It can be more cost‑effective for businesses with long debtor days or rapid growth, but overall cost depends on your debtor profile, advance rate and fees, so compare worked examples.

8. What documents do lenders and brokers typically require to apply for invoice finance?
Lenders usually request company accounts, recent bank statements, management accounts, a 6–12 month sales ledger/aged debt report and details of top customers and any disputed invoices.

9. What’s the difference between recourse and non‑recourse invoice finance and do I need bad‑debt cover?
Recourse means you remain liable for unpaid invoices while non‑recourse transfers some bad‑debt risk to the funder at an extra premium, so choose based on your sector risk and appetite for insurance costs.

10. Will submitting an enquiry through UK Business Loans affect my credit score or commit me to an application?
No—completing a free eligibility enquiry through UK Business Loans does not affect your credit score and is not a loan application, it simply matches you with suitable lenders and brokers.