How much does invoice discounting cost?

Invoice discounting has two key costs involved, which should be considered prior to setting up a facility with either a Bank lender or an independent.

Service Charge
The service charge, also often referred to as an admin fee to cover the administrative function the bank or independent lender carries out. The service charge associated with invoice discounting is usually lower than service charges relating to factoring facilities. The is a result of the sales ledger being ‘outsourced’ to the bank under a factoring facility, where as, using invoice discounting, this function remains with the company.

Discount Rate
The discount rate is the interest payable on the loan or advance, provided by the lender, i.e. 85% of the outstanding invoice value. The discount rate will typically be expressed as percentage points over bank base rate.