Calculating The Invoice Discounting Costs

Invoice financing is an attractive solution if you are one of those businesses that face regular cash flow problems. This option lets you receive the money immediately without waiting for your customers to clear the dues. You will be paying two types of invoice discounting costs. The first is the fee charged by the financing company for providing its services. This fee will be a percentage of your business turnover. The percentage can vary based on the turnover. This is the reason the cost of invoice discount can vary from one financier to another.

The borrowing cost is charged separately and is the second cost associated with the factoring finance. A small fee is charged for each invoice against which the advance is issued. There can be some additional costs based on the terms and conditions of the finance provider. For example, there may be a penalty fee for ending the agreement early when the deal is based on a fixed term. These financiers also offer other services. The overall cost will increase if any of those additional services are availed.