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• 25 Feb

  Bundled Fees In Invoice Finance

  Bundled fees in invoice finance refer to a way of structuring the charges so that you only pay a single fee instead of multiple different charges. This makes the charges simpler and more predictable although that simplicity can come at a premium. 

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  Understanding Bundled Fees in Invoice Finance: Pros, Cons, and Key Considerations

  

  When exploring invoice finance, businesses often come across different pricing structures, one of which is the bundled fee model. Unlike traditional invoice finance pricing, where service or administration fees and discount charges are billed separately, a bundled fee combines those costs into a single charge.

  The consolidated charging structure can also include other services such as the bad debt protection element (the fee for bad debt protection).

  This single-fee approach offers simplicity, but it also has pros and cons that businesses should consider.

  For a full explanation of the costs with examples see our article about: Invoice Finance Example Costs.

  What Is a Bundled Fee in Invoice Finance?

  A bundled fee is an all-in-one charge applied to an invoice finance facility, covering both the service fee (typically a percentage of turnover) and the discount charge (similar to interest on funds advanced). Instead of separate charges for managing and funding invoices, the finance provider rolls everything into a single percentage fee based on the invoice value. This fee may be subject to VAT depending upon the product used.

  How Bundled Fees Work

  With a single charge fee structure, businesses receive an agreed-upon percentage of their invoice value upfront. The finance provider then deducts a fixed percentage as the single all-inclusive fee when the customer pays the invoice. This approach removes the complexity of variable discount rates or tiered service fees.

  For example, if a business raises an invoice worth £10,000 and the bundled fee is 2.5%, the total cost would be £250 (+ VAT if applicable). At the time of writing, there was a bundled fee offer for recruiters reducing that charge to just 1.5% for the first 6 months (see our list of invoice finance offers for the terms).

  Below we discuss some of the pros and cons of bundled fees in factoring and invoice discounting.

  Advantages of Bundled Fees

  1. Predictability and Simplicity

  A flat fee structure makes it easy to calculate costs upfront, removing uncertainty about fluctuating discount charges.

  2. Easier Cash Flow Management

  Since businesses know exactly how much will be deducted, cash flow forecasting becomes more straightforward.

  Related content: See our Cash Flow Guide.

  3. No Hidden Charges

  Some traditional invoice finance agreements include additional fees. With some bundled fee pricing structures, everything is consolidated, reducing the risk of unexpected costs.

  Disadvantages of Bundled Fees

  1. Potentially Higher Costs

  For businesses with customers who pay invoices quickly, a bundled fee may be more expensive than a traditional model where discount charges accrue over time. It can also be the case that the fees for a bundled facility are slightly higher than the unbundled fees are likely to be.

  2. Less Flexibility

  A fixed percentage charge means businesses pay the same fee regardless of how long an invoice takes to be settled, which may not always be cost-effective.

  3. Not Always Suitable for High-Volume, Low-Margin Businesses

  Businesses that operate on tight profit margins may find that all-in-one fees eat into their profitability more than an unbundled pricing model would.

  Who Should Consider a Bundled Fee Invoice Finance Facility?

  You may be asking "Is a bundled fee option right for my business?" - this may help you decide.

  An all-inclusive fee may be a good fit for businesses that:

  • Prefer cost certainty and straightforward pricing.
  • Issue invoices which are normally paid by customers after a consistent credit period.
  • Want to avoid complex financial calculations.
  • Raises c. £100,000+ of invoices by value each year.

  However, businesses with fluctuating invoice settlement periods or those looking for more control over finance charges might benefit from a traditional service fee and discount charge model.

  Which Invoice Finance Companies Offer All-Inclusive Fees?

  Not all invoice finance companies offer this type of all-inclusive fee structure despite there being many providers in the UK. Speak to an expert on 03330 113622 and we will connect you with providers that offer this type of pricing structure.

  Summarising All Inclusive Fees In Factoring And Invoice Discounting

  An all-inclusive fee invoice finance structure offers a simple, predictable pricing model that can work well for certain businesses. However, it’s important to compare it against traditional pricing structures to determine the best fit for your financial needs. If you’re unsure which approach suits your business, speaking to an independent invoice finance broker can help you find the most cost-effective option.

  For expert guidance on invoice finance and to explore the best options available, contact FundInvoice today at 03330 113622.

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  FAQ About Bundled Fees

  What Is A Bundled Fee In Invoice Finance?

  It's a single charge percentage of invoice value instead of a separate service fee and discount charge.

  What Is The Lowest Bundled Fee?

  The lowest bundled fee starts from about £3,500 (+ VAT if applicable) per annum but the fee percentage you pay will be unique to your business.

  By Glenn Blackman