- 28 Jun
Single Fee Invoice Finance.
Single fee invoice finance (IF) is where the pricing for an invoice finance facility is structured such that there is only one fee percentage that the customer pays. This will typically be a percentage of the invoice value.
Single Fee Versus Traditional Invoice Finance Pricing
The normal method of costing and IF arrangement is to charge two fees (plus additional charges which may, or may not be included within a single fee structure). Firstly, a service charge – which works in the same way as the single fee - a percentage of your invoice value.
Secondly, there is normally a discount charge which works in a similar way to interest on a loan. The discount charge is a percentage (called the margin), charged over some form of base rate, or LIBOR, against the funds in use on your facility.
Single Fee Pricing
The single fee charging structure looks to combine the service charge (sometimes called the "administration fee" or "admin charge") with the discount charge, in order to arrive at a single fee system.
Whilst you may argue that this makes it very easy to work out what you are going to pay, there are some drawbacks to single fee systems.
Drawbacks With One Fee Prices
It tends to be the case that there will be an additional margin added to a single fee arrangement, in order to account for fluctuations in discount charge, that will not be billed to the customer. This can mean that this type of pricing structure ends up more expensive than the traditional method of billing a service charge, and the discount charge. In our experiences it is normally a minimum of 10% more expensive.
If you are looking for the cheapest possible quote, the traditional approach to quoting a service charge and discount charge is likely to be the cheapest option. If you want simplicity of calculation of your fees - a single fee structure could be the answer.
Single invoice funding is not related to the pricing approach. It is a type of product whereby you pick and choose invoices to get funded, and it can be costed in any of the ways mentioned above, as explained in the article linked at the beginning of this paragraph.
For further information about prices, please see the summary of our invoice funding pricing research.