The Answers - What Businesses Expect to Pay For Invoice Finance

As part of our recent research activity, we have spoken to 100 potential invoice finance prospects in order to understand their expectations about the cost of invoice finance. We asked them what percentage of their turnover they expected to pay for various types of invoice finance such as factoring and invoice discounting.

On average, the businesses expected to pay 3.93% for factoring and 1.97% for invoice discounting, so they expected the cost of factoring to be almost double the cost of invoice discounting. It is clear that in many cases SMEs are also overestimating the cost of invoice finance generally. SMEs estimates appear to support their expectations that factoring will be expensive.

We also compared the pricing estimates of businesses that preferred bank owned factors with those that would opt for an independent provider. We found that those that would prefer an independent factor estimated the likely cost of invoice finance to be 57% higher than those that said they would prefer a bank owned provider. This clearly indicates an expectation that invoice finance from an independent factor will be substantially more expensive than that from a bank, which again is not always the case.

These results highlight once again that potential customer's price expectations are often out of line with reality and we need to continue to work to educate businesses regarding the actual costs of these services.