Invoice Finance Calculator

Invoice finance is an umbrella term covering both factoring and invoice discounting. It allows businesses to unlock cash tied up in unpaid invoices by borrowing against them. Typically 70-90% of invoice value is advanced immediately, with the balance (minus fees) paid when the customer settles. It is one of the most popular forms of SME finance in the UK.

Total costs are typically 1.5-4% of annual turnover. Factoring (with credit control) costs more at 1.5-3% service fee plus discount charge. Invoice discounting (confidential) costs 0.2-1% service fee plus discount charge. The discount charge is similar to interest, typically 1.5-3.5% above base rate. On £1M turnover, expect annual costs of £15,000-£40,000.

Factoring: the finance company manages your sales ledger and collects payments from your customers. Customers know about the arrangement. Best for smaller businesses. Invoice discounting: you manage your own sales ledger. The arrangement is confidential. Best for businesses with turnover over £500,000 and established credit control processes.

Selective invoice finance (also called spot factoring) allows you to choose specific invoices to finance rather than your whole debtor book. This is more flexible but typically more expensive per invoice (2-5% per invoice). It suits businesses that occasionally need cash flow support rather than ongoing finance.

With 'recourse' factoring (most common), you must repay the advance if the customer doesn't pay. With 'non-recourse' factoring, the factor bears the bad debt risk — but this is more expensive and only covers insolvency, not disputes. Most facilities include credit insurance for an additional fee.