Updated 2026-05-19

Tiered fee

A fee that increases in steps as an invoice stays unpaid longer.

Why it matters

Tiered fees increase as invoices age, creating a direct financial incentive for the seller to collect or resolve slow-paying invoices quickly. The first tier covers a defined period, often 30 days, at the base rate. Subsequent tiers increase the fee by an additional percentage for each additional period the invoice remains unpaid. For industries with customers who routinely pay in 60 to 90 days, tiered fees can result in actual costs substantially higher than the stated base rate. Modeling the expected payment timeline using realistic customer payment patterns is essential for comparing tiered-fee programs against flat-fee alternatives.

How it appears in contracts

Tiered fee structures appear in the Fee Schedule or Pricing section of the factoring agreement. Common language defines fee tiers by invoice age: a base fee applies for the first 30 days, an additional fee applies for days 31 to 60, and a further increment applies for each additional period. Sellers should identify whether the fee is calculated on the invoice face amount or the advance amount, since this affects the actual cost percentage. Some agreements reset the tier clock on partial payments; others continue accumulating from the original invoice date.

Related terms

• Reserve
• Recourse
• Chargeback
• Notice of assignment