Invoice Financing Cost Calculator

How invoice financing is priced

With invoice factoring or invoice finance, a provider advances you a percentage of an unpaid invoice — typically 70–90% — and releases the balance, less their fees, once your customer pays. The headline cost is usually a discount or factor fee charged as a percentage of the invoice, sometimes with an additional service fee. Because the fee applies to the whole invoice but you only receive an advance on part of it, the real cost of the money is higher than the quoted rate suggests.

Financing vs recovering the debt

Invoice financing solves a cash-flow problem, but it costs you a slice of every invoice you fund — including invoices that would have been paid on time anyway. If the underlying issue is a customer who simply will not pay, financing only defers the problem and adds cost. Commission-only debt recovery works differently: you keep the full face value of the invoice and pay a fee only if the debt is recovered. For a single overdue invoice, recovery is often far cheaper than discounting it.

Reading the effective annualised rate

The effective annualised rate is the figure to compare against other finance options such as a bank overdraft or business loan. A 2.5% fee on a 30-day invoice is not the same as a 2.5% annual interest rate — annualised, it is considerably more expensive. Use this number to judge whether the convenience of early cash is worth the cost, and to compare quotes from different providers on a consistent basis.

This is an indicative calculation only — general information, not financial advice. Fees, advance rates, and terms vary by provider and by whether the facility is recourse or non-recourse. Confirm the actual costs with your finance provider before entering into any arrangement.