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Invoice finance charges – what to look out for

Hidden fees have been a recurring bugbear in personal and commercial finance for decades. In 2016, it was reported that banks charged small businesses an additional £4bn on top of standard fees, and in 2015, a study revealed that eight out of ten customers feel as though their banks are ‘tricking’ them with hidden fees. Consumers and businesses are united in their disdain for these charges, and exponentially less likely to trust or transact with an organisation because of them.
 
With invoice finance charges, it can be particularly painful when lenders are less than forthright about fees: when you don’t have a clear, upfront idea of what your business is paying, it’s easy to be blindsided – and hard on your company ledger. These costs can undo months of careful budget planning and, in some cases, imperil your business’ very existence.
 
Transparency is an essential component of any healthy business relationship. Hidden charges may be legal, but they are not honest – and at Nucleus, we endeavor to be as open and honest with our customers as we can.
 
We’ve detailed two of the most common invoice finance charges below – to get a detailed list of other charges you need to look out for download our eBook on them now!.
 
Download the Hidden Fees eBook  

Trust account charges
 
Whenever an invoice is paid, a trust account fee is taken from your account and paid to the lender in order to cover financial handling costs. These invoice finance charges are taken before the provider transfers any remaining balance to the client company.
 
These charges amount to around 0.2% of the total amount received: an amount that may seem trivial at first glance, but one that can quickly add up if you have a significant number of unpaid invoices.
 
CHAPS (clearing house automated payment system) fees
 
The CHAPS is paid every time you withdraw money against an invoice. These are used by most major banks, building societies, and other UK lenders to facilitate and clear short-notice, same-day payments.

They ordinarily cost between £20 and £30 per transaction. While this may seem small relative to the broader scope of your invoice finance arrangement, it can add up over several same-day transactions – so if your margins are particularly narrow, it may be best to consolidate withdrawals wherever possible.
 
These aren’t the only fees you’ll be subject to: depending on your circumstances and the specific kind of invoice finance arrangement you’ve agreed, there may be more - that could dramatically increase the cost of your invoice finance package – use our invoice finance calculator to find out how much your facility will actually cost.

In life, surprises are often delightful. In finance, surprises are anathema. If you’re going to pay fees, be prepared – and don’t work with anyone who won’t tell you what they expect from you upfront.
 
To find out more about invoice finance – and other fees that lenders hide from customers – download our new eBook.

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