Funding information: Aarubi Finance Ltd is not authorised or regulated by the Financial Conduct Authority. We provide Merchant Cash Advance services with YouLend and 365 Finance and may introduce eligible businesses to selected unregulated commercial finance providers. We do not provide consumer credit, regulated mortgages or personal financial advice. Eligibility and terms apply. This article is general information, not individual financial, legal or tax advice.
Two invoice-finance quotations can have similar headline rates but different total costs. Compare the cash you can actually draw, the services included and the contract's fee calculations using the same trading assumptions.
Start with our finance FAQ on invoice finance and alternatives.
Understand the two main charges
A service charge pays for the facility's administration and any included services. A discount charge is linked to funding used. Their calculation bases and timing depend on the contract. The British Business Bank's invoice-finance guide explains the basic structure.
Do not assume the discount charge is always the largest cost. Avoid comparing a percentage of invoice turnover with a percentage of funds drawn as if they were the same measure.
Questions for a like-for-like quotation
| Item | Ask the provider |
|---|---|
| Service charge | What value is the percentage applied to, and does that include VAT on invoices? |
| Funding charge | What balance, time period and benchmark are used? Can the rate change? |
| Minimum charge | Which fee has a minimum, and which charges are added separately? |
| Available funding | Which invoices qualify, what proportion is advanced, and what reserves apply? |
| Other charges | Are there setup, audit, transfer, legal, renewal or termination costs? |
| Customer limits | Does reliance on one customer reduce availability? |
| Exit | What notice, minimum term, repayment and release requirements apply? |
Request the complete schedule rather than treating these as charges every provider applies.
Check what a minimum fee actually covers
Suppose a hypothetical agreement has a £500 minimum service charge and a separate £200 funding charge. If the calculated service charge is £300, the total would be £700, not £500.
This is an illustration, not a market rate. Another agreement may define its minimum differently. Ask for a worked example based on its exact wording, including a quiet trading month.
Use your own trading assumptions
Give each provider the same expected invoice volume, customer payment timings and funding requirement. Ask for examples covering normal trading, slower collections and a lower-volume month.
Record fees separately from the retained portion of an invoice. A reserve is not necessarily a fee, but it affects cash availability. Confirm when the balance is released and what deductions can be made.
Check how disputes, credit notes, overdue debts and concentration limits affect both charges and available funding. Ask what happens if availability falls below the amount already drawn.
Compare services and risk as well as price
Factoring commonly includes collection work; invoice discounting usually leaves it with the business. Confirm exactly who contacts customers and whether they will be notified.
Ask who bears non-payment risk. “Non-recourse” or bad-debt protection should not be assumed to cover every dispute or unpaid invoice. Obtain the exclusions, conditions and claim process in writing.
Read any personal guarantee or company security document separately, with independent legal advice where appropriate.
Before signing
- Request a cost illustration using your own figures.
- Test the minimum-charge wording and quiet-month cost.
- Check customer eligibility and any concentration limits.
- Confirm notice, termination and release conditions.
- Compare the cost of managing collections internally.
- Ask whether proposed changes to fees can be agreed; negotiation is not guaranteed.
Invoice finance may help bridge payment delays, but it is not a cure for persistent losses. Compare other finance structures and read our business finance FAQ. AARUBI's referral scope does not mean every invoice-finance facility is available through us.
