Invoice discounting calculator, 2026/27

How this is calculated

Invoice discounting releases an agreed percentage of your approved sales ledger, typically 80-90%, as soon as invoices are raised, with the balance paid over once the customer settles, less charges. This calculator multiplies your outstanding ledger by the advance rate to show the cash released, then applies a service fee on the ledger value and a discount charge, essentially interest, on the funds actually drawn, prorated for how long invoices typically stay outstanding.

The discount charge is usually quoted as an annual percentage, often referenced to Bank of England base rate plus a margin, and is only charged on the amount actually advanced and for the days it is outstanding, which is why average collection days materially affects the total cost.

Unlike invoice factoring, discounting is confidential: your company keeps running its own credit control and collections, and customers are typically unaware a finance arrangement exists, which suits companies with an established credit control function that do not want customers redirecting payments to a factor.

When invoice discounting suits a company

It tends to suit established businesses with a track record of managing their own collections, a reasonably diversified customer base, and a genuine need to release cash tied up in a growing sales ledger rather than to fund a struggling business. Lenders typically look for a minimum turnover and a robust credit control process before offering confidential facilities.

It is commonly used to fund growth, smooth seasonal cash flow, or bridge the gap between paying suppliers and staff and collecting from customers on 30, 60 or 90 day terms.

Comparing the real cost

The headline advance rate is only part of the picture. The service fee, discount charge, any minimum fee commitments and arrangement fees all reduce the net benefit, so it is worth comparing the effective annual cost across providers rather than the advance rate alone.

Because charges are linked to how quickly customers pay, tightening your own credit control can materially reduce the cost of the facility over time, since funds are drawn for fewer days.

What is the difference between invoice discounting and invoice factoring?

Discounting is confidential: you keep control of credit control and collections and customers are unaware. Factoring involves the finance company taking over collections and often disclosing the arrangement to customers, usually at a somewhat higher fee.

What advance rate can I expect?

Most facilities advance 80-90% of approved invoice value upfront, releasing the balance, less charges, once the customer pays. The exact rate depends on your sector, customer concentration and credit control track record.

Does invoice discounting show up to my customers?

No, that is the main distinction from factoring. Invoices, statements and collections continue under your own company name, and the finance arrangement is not disclosed to customers.

What does invoice discounting actually cost?

Typically a service fee of around 0.2-1% of turnover plus a discount charge similar to an overdraft rate, applied only to funds drawn and for the days they are outstanding, so faster-paying customers reduce the overall cost.