Invoice finance prices are quoted on different bases. See how each fee is calculated, how a discount fee compares with a rate, and what late payment costs.
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Invoice Finance · Rates · Fees
Two invoice finance quotes can show the same percentage and cost very different amounts. Here is how each charge is worked out, how a discount fee compares with a rate, and what a late payer does to the bill.
Quick Answer
Invoice finance usually costs a discount rate on the money you draw plus a service fee on invoice value, so a quoted percentage means little until you know its base and period. Compare quotes in dollars against cash drawn, then test what a late payer does to the total.
Also called: factoring fee, discount charge. Both usually mean the discount fee, which is one part of the total cost rather than all of it.
How much does invoice finance cost?
Invoice finance typically costs a discount rate on the funds you draw plus a service fee on invoice value, and the all-in annual cost usually sits well above the headline rate. Our lender policy matrix records the indicative bands below, which vary by funder and are not a quote.
| Charge | Indicative band | Charged on |
|---|---|---|
| Discount rate | Around 8.5 to 14 per cent a year | Funds drawn |
| Service fee | Around 1 to 2.5 per cent | Invoice face value |
| Factoring service fee | Around 1.5 to 5 per cent | Invoice face value |
| Spot factoring | Around 3 to 8 per cent | Invoice face value |
| All-in effective cost | Commonly around 15 to 26 per cent a year | All charges, annualised |
Source: Switchboard Finance lender policy matrix, invoice finance section, as at September 2026, drawn from panel records and public guides. Indicative only. Your quote depends on your customers, your ledger and the funder.
You will also see a per-period figure in our guides: around 1.25 to 3 per cent per 30 days as a category norm. Simply annualised, that is about 15 to 37 per cent, so the all-in band above sits inside it, and the top of the per-period range is generally more likely on smaller or single-invoice arrangements. Both are indicative, and the base each one is charged on still decides the real cost.
How is invoice finance priced?
Invoice finance is priced as an amount on a base over a period, and all three parts can differ from one quote to the next. The amount is the percentage or dollar figure on the offer. The base is what that percentage is charged on, usually the full invoice value or the cash drawn. The period is how often the charge applies, which may be daily, monthly or a set fee cycle.
Change any one of those and the same headline number costs something different. That is why a factor rate on invoice value and an annual percentage rate on cash drawn cannot be read side by side, even though both are shown as percentages.
Most facilities also carry two layers of cost: a funding charge for the money and a service charge for running the facility. In deals I've seen, the first useful question to ask of any quote is which of those layers the headline number covers.
This post covers the pricing and the calculation. The invoice finance guide covers how the product works and the overall cost picture, and the invoice and debtor finance providers guide covers comparing two offers. If the funding runs through your customer's program rather than your own facility, supply chain finance for small suppliers is a different arrangement with its own pricing.
What fees does invoice finance charge?
Invoice finance usually charges a funding fee plus a service fee, and some facilities add setup, minimum, protection or exit charges. Which of these apply, and how much each one is, varies by funder.
| Fee | Charged on | When it applies | What to check |
|---|---|---|---|
| Discount fee | Invoice value, sometimes cash drawn | Each fee period the invoice stays unpaid | How long the period is, and whether a part period is charged in full |
| Interest on the drawn balance | Cash drawn | Daily or monthly, varies by funder | The stated rate basis and how often it is charged |
| Service or administration fee | Turnover through the facility, invoice value or a flat amount | Per invoice or monthly | Whether it is included in the headline quote, and what it covers |
| Setup or establishment fee | A flat amount or a share of the limit | At the start, sometimes again on renewal | Whether it is paid upfront or taken from the first advance |
| Minimum charge | An agreed minimum level of use or fees | When use falls below the minimum | What to test in a flexible facility |
| Bad debt protection | The invoices or ledger covered | Where the funder carries some of the non-payment risk | What is covered, and what is excluded |
| Exit or early termination charge | Varies by agreement | If you leave before the term ends | How exit fees are calculated, and the notice period |
Each row sits on a different base, so the percentages cannot simply be added together. Convert each one to dollars first, then add the dollars.
The advance rate matters here too. It sets how much cash you actually receive, while the holdback amount is the part of the invoice kept back until your customer pays. A fee charged on the whole invoice is also being charged on money you have not received yet.
How does a discount fee compare with an interest rate?
A discount fee is charged on invoice value for a fee period, while an interest rate is charged on cash drawn over a year. The discount fee is the difference between an invoice's face value and the price a funder pays for it, so it behaves more like a price than a rate.
Two things separate them. Invoice value is larger than cash drawn, so the same percentage costs more when it sits on the invoice. And a fee period may be much shorter than a year, so a small looking number can be a large one once it is scaled up.
Which style of quote is cheaper?
Neither style is cheaper by nature, because the result depends on how long your invoices stay unpaid. Interest on the drawn balance charges for the days you use. A flat fee per period charges the same whether the customer pays early in the period or on its last day, so its true cost moves with your customers' payment habits.
How do you work out the annual cost?
To work out the annual cost, turn the fee into a percentage of cash drawn, then scale it to a year. The steps below are example only, not a quote. The inputs are invented to show the arithmetic and say nothing about what any funder charges.
- Set the inputs. Invoice $10,000, advance $8,000, fee 2 per cent of invoice value per 30 days. The remaining $2,000 is held back until the customer pays.
- Turn the fee into dollars. 2 per cent of $10,000 is $200 per 30 days.
- Measure it against cash drawn. $200 on $8,000 drawn is 2.5 per cent for the 30 days.
- Scale it to a year. 2.5 x 365 / 30 gives a simple annual equivalent of about 30 per cent.
That figure is a yardstick, not a rate anyone is offering, and most invoices are not funded for a full year. The inputs were chosen for easy arithmetic, which is why the result sits above the indicative all-in band. Its use is that you can run the same four steps on every quote and compare them on a like-for-like basis. Add service fees and other charges in dollars at step 2 so the result reflects the whole cost.
In deals I've seen, the order of two quotes can flip once the service fee goes in, which is why the headline percentage is the wrong place to stop.
What happens to the cost when a customer pays late?
When a customer pays late, the cost rises, and under a fee cycle it can rise in steps rather than by the day. Continuing the same example only: if the customer pays on day 31 and the cycle restarts, the fee is $400 for 31 days. One extra day has doubled the charge, because the cycle restarts in full.
Daily interest behaves differently, since a day late costs roughly one more day. A flat fee cycle needs a closer read, particularly how the period is counted and whether a part period is charged in full.
Long terms carry the same effect. A business funding wages against 60 day terms sits across more than one 30 day cycle even when customers pay on time. Late payment can also trigger other parts of the agreement, including when a funder can hand an unpaid invoice back to you, which the invoice factoring agreement clauses post covers.
What moves a quote higher or lower?
A quote moves with the risk in your customers, how they pay and how much work the facility takes to run. No two ledgers price the same, so treat these as directions rather than amounts.
- Who owes the money. Stronger customers generally help. See what lenders read in a debtor book.
- How spread the ledger is. Heavy reliance on one customer can narrow the terms, as the debtor concentration limit post explains.
- How fast customers pay. Slower ledgers typically cost more, because the funder's money is out for longer.
- Who carries non-payment. A facility where the funder takes on bad debt risk usually prices that risk in.
- How much is funded. Single invoice finance and a whole of ledger debtor finance facility are priced on different footings.
- How you reach the funder. Going direct or through a broker changes what you see, covered in debtor finance through a broker or direct.
For the wider picture on funding options, the Business Owners Hub sets out where invoice finance sits next to other facilities.
Is there GST on invoice finance fees?
GST on invoice finance fees depends on what each fee pays for, so a discount fee and an administration fee are not treated the same way. Under debt factoring and invoice discounting, the assignment of book debts is a financial supply. Sales accounting services are not financial supplies and are usually a taxable supply, even where the fee is netted off the price (ATO, GSTR 2004/4, paragraphs 88 to 91, read 2 November 2026).
That last point catches people out, because a fee netted off the price may not appear as a separate payment. Ask your funder how each charge is split on the statement, and pass that to your accountant, who can work out how it applies to your business.
Invoice finance pricing is an amount on a base over a period, layered with service and other fees. A headline percentage shows only part of that. Turn every charge into dollars, measure the total against cash drawn, scale it the same way for each quote, then rerun it with your customers paying late.
Key takeaway: compare quotes on cash drawn, in dollars, using how your customers really pay.Frequently Asked Questions
Invoice factoring has no single typical interest rate, because many funders charge fees on invoice value as well as, or in place of, interest. Our lender policy matrix records discount rates of around 8.5 to 14 per cent a year on funds drawn and factoring service fees of around 1.5 to 5 per cent of invoice value, as at September 2026, indicative only and varying by funder. Convert each quote to cost on cash drawn, then compare it using the providers guide.
A finance charge on an invoice is a fee for carrying an unpaid balance, and the term is used in two ways. On a supplier's invoice it usually means interest or a late fee for paying after the due date, where the terms allow it. On a funder's statement it usually means the discount fee or interest charged for advancing cash against the invoice. Either way it is separate from the invoice value recorded in your accounts receivable.
The fees that come with invoice financing usually include a funding charge, either a discount fee or interest, and a service fee for running the facility. Some facilities add setup, minimum, bad debt protection or exit charges, and which of these apply varies by funder. Ask for every charge in dollars on one sample invoice, along with the advance rate, before comparing options.
GST on invoice finance fees depends on what each fee pays for. The ATO treats the assignment of book debts as a financial supply, while sales accounting services are usually a taxable supply, even where the fee is netted off the price. Ask your funder how the charges are split on the statement and whether you will receive a tax invoice for the taxable part.
Invoice finance can cost more than the quote because the headline percentage usually covers one charge over one period. The common gaps are customers paying later so that extra fee cycles apply, service fees sitting outside the headline number, and minimum or other charges in the agreement. Check your statement line by line against the offer, using the invoice factoring company checks as a guide.
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