Discount fee
The main factoring charge—usually stated as a percentage of the invoice amount. How much it costs in practice depends on whether it's flat, tiered, or daily and how fast your customers pay.
Why it matters
The discount fee is the core cost of factoring, but the structure matters as much as the rate. A 3 percent flat fee on a 30-day invoice is not the same as 0.1 percent per day on the same invoice. If the customer pays in 20 days, the daily rate is cheaper. If the customer pays in 45 days, it costs significantly more. Use the annualized equivalent for any fee structure to make honest comparisons.
How it appears in contracts
The fee schedule section of the factoring agreement defines both the rate and the base on which it is calculated—face value or advance amount—along with the accrual period. Some contracts state fees per 10-day period; others use calendar-month intervals. The discount fee may also reference a 'minimum fee per invoice,' meaning that even if the customer pays in 5 days, a minimum dollar amount is still charged. Review the fee table, the base amount, and any minimums before comparing programs using a headline rate alone.
Related terms
Related reading
Sources
- International Factoring Association - International Factoring Association. Accessed 2026-05-19.
- Secured Finance Network - Secured Finance Network. Accessed 2026-05-19.