01
Customer quality
Who owes the money matters more than who is borrowing it. A ledger of large, creditworthy, reliably paying customers prices better than one of small or slow ones, whatever the applicant looks like.
Guide
Two fees, three conventions, one comparable number.
Receivables funding is quoted in a way that makes offers hard to compare and easy to underestimate. The arithmetic that fixes both takes about five minutes.
MS
Matt Stiles Editor
Published 8 September 2026 Last reviewed 8 September 2026 Read time 12 min
The short version
Five lines that make quotes comparable.
- The discount fee behaves like interest. It is charged on the amount advanced for the days it is outstanding, and it is the component most like a rate.
- The service fee is charged on face value. Which is a bigger base than the advance, so a small-looking percentage is a larger number than it appears.
- Standing fees are charged whether or not the facility is used. Line fees, audit fees and minimum charges are where a lightly used facility becomes expensive.
- A rate per 30 days is not an annual rate. Roughly twelve times it before compounding, and the convention makes cheap-looking quotes expensive.
- Indicative only. Every figure here is illustrative. Actual pricing comes from the funder after assessment.
The components
Every fee, what it is charged on, and when it applies.
Not every facility carries all of these, and a proposal that mentions only the first two is describing part of the cost.
| Fee | Charged on | When | Typical shape |
|---|---|---|---|
| Discount fee | The amount advanced | Per day outstanding | A percentage per 30 days, or an annual rate |
| Service fee | Invoice face value | Per invoice funded | A percentage of value |
| Facility or line fee | The agreed limit | Monthly or annually | A flat amount or a percentage |
| Minimum service fee | A volume floor | Monthly | Payable even if volume is lower |
| Set-up fee | The facility | Once | A flat amount |
| Audit and review fee | Each review | Periodically | A flat amount per visit |
| Disbursements | Searches and filings | As incurred | Pass-through |
| Termination fee | Ending early | On exit | Set out in the agreement |
Indicative fee structures across the New Zealand market. Any particular facility is priced by its funder.
Worked example
A typical quote, converted to one number.
A funder quotes 1.15% per 30 days on the advance, a 0.4% service fee on invoice value, a $250 monthly line fee, a $1,500 set-up fee and two audits a year at $900 each. The business puts $250,000 of invoices through each month and collects at an average of 48 days, with an 85% advance rate.
The discount fee runs on an average advance of roughly $340,000, given that 48 days of invoicing at $250,000 a month is about $400,000 of ledger at any time and 85% of it is advanced. At 1.15% per 30 days, that is roughly $4,700 a month, or $56,400 a year. The service fee on $3m of annual invoice value at 0.4% is $12,000. The line fee is $3,000, the audits are $1,800, and the set-up is $1,500 in year one.
The total is around $74,700 in the first year and $73,200 thereafter. Against an average advance of $340,000, that is an all-in cost of roughly 21.5% a year, which is a very different figure from the 1.15% at the top of the proposal. Nothing was hidden and nothing was misrepresented, and the arithmetic simply was not performed.
Illustrative annual cost
- Discount fee
- ~$56,400
- Service fee
- ~$12,000
- Line fee
- $3,000
- Audits
- $1,800
- Set-up, year one
- $1,500
- All-in, on average advance
- ~21.5%
Illustrative on stated assumptions and rounded. Not a quote or offer of credit.
Where the number comes from
The service fee is doing more work than it looks like.
In the example above the service fee is 0.4%, which reads as trivial next to a discount rate. It contributes $12,000 a year, which is roughly a sixth of the total, and it does so because it is charged on the face value of everything put through rather than on the amount actually advanced.
That base difference is the reason two quotes with identical discount rates can differ by thousands. A funder at 0.25% service on the same volume charges $7,500, and one at 0.8% charges $24,000, and neither difference is visible in the headline rate anyone compares.
It also means the service fee scales with turnover rather than with borrowing. A business that grows 40% pays 40% more service fee even if its average advance is unchanged, which is worth knowing before signing a facility intended to support growth.
What moves the price
Four things that determine what a business is quoted.
Understanding these makes it clear which parts of a quote are negotiable and which are a consequence of the ledger.
02
Concentration
A ledger dominated by one customer means the funder is effectively lending against that customer. It raises the price, lowers the advance and caps how much is usable.
03
Dilution
Credit notes, rebates and short payments mean a ledger converts to less than its face value. Funders measure this, and persistent high dilution reduces the advance rate and raises the price.
04
Volume
Larger, steadier volume prices better, and it also determines whether a minimum service fee bites. A facility with a floor set above actual volume is paying for turnover that does not exist.
The two questions
The total in dollars, on your own volume, for twelve months.
The first question is what the facility will cost in dollars over a year at a stated invoice volume and a stated average collection period, with every fee included. The second is what happens if volume is 30% lower than that, which is where minimum fees and line fees appear. Any funder can answer both, the answers are directly comparable between providers, and the two together surface almost everything that a rate comparison misses.
In context
What that cost buys, against the alternatives.
Receivables funding is more expensive per dollar than secured lending and cheaper than most fast unsecured lending. The comparison worth making is against what is actually available.
| Feature | Invoice finance | Secured term facility | Short-term unsecured |
|---|---|---|---|
| Indicative all-in cost | High teens to low twenties | Lower | Higher again |
| Limit grows with turnover | Yes | No | No |
| Needs assets | No, receivables only | Yes | No |
| Available with a short history | Frequently | Less often | Yes, at a price |
| Cost when not drawn | Standing fees only | Full interest | Not applicable |
The comparison that matters is against what the business could actually obtain. A facility at 20% is expensive against a bank line the business cannot get and cheap against a short-term facility it can.
Reducing it
Three things that lower the cost without changing funders.
Collecting sooner is the largest lever. The discount fee accrues per day outstanding, so taking ten days off the average collection period reduces it directly, and it also reduces how much has to be drawn in the first place. On the example above, moving from 48 days to 38 would take roughly $11,000 a year off the discount fee alone.
Reducing dilution is the second. Credit notes and short payments are usually a symptom of something operational, whether that is quoting, delivery or invoicing accuracy, and fixing the cause improves both the advance rate and the price at the next review.
Reviewing the facility annually is the third and the most commonly neglected. Pricing set when a business was newer and smaller is rarely adjusted on its own, and a business with two more years of history and a cleaner ledger is a different proposition from the one that signed.
Method
How this guide was written, and its limits.
The fee structures described are those in general use in the New Zealand market, and the figures used are illustrative rather than any funder’s published pricing. Rates, service fees, advance rates and minimums vary considerably by funder, by sector and by ledger, and the only numbers that matter are those a funder puts in writing.
Nothing here is financial advice. This site is not a lender, a broker or a registered financial adviser, and what a particular business will be offered depends on facts a website cannot see.
The agreement
Four clauses that change the cost after signing.
These sit in the facility agreement rather than the proposal, and each one has produced a surprise for somebody.
01
The minimum term and notice period
A twelve-month minimum with three months’ notice means a facility entered in January cannot end before the following April. Where the business expects its funding needs to change, the exit is worth reading before the entry.
02
The eligibility definition
What makes an invoice fundable, including the age at which it drops out and how concentration is capped. This clause determines the usable facility and it is frequently read for the first time when an advance is refused.
03
The over-advance provision
What happens where the drawn balance exceeds the borrowing base, which can occur through debt ageing rather than through any new drawing. The remedy required and the time allowed are both set here.
04
The recourse period
How many days an invoice can be unpaid before it is recharged. A shorter period shifts risk to the business, and a difference of thirty days between two proposals is a material difference in what is being bought.
A note on comparison sites
Why published pricing tables rarely help here.
Receivables pricing is set per business rather than published as a rate card, because it depends on customer quality, concentration, dilution and volume. A table showing rates from a range of funders is describing the low end of each range, which is available to a business none of the readers resemble.
That is why this site does not publish a comparison of funders. A comparison that would be useful requires current pricing for a specific ledger, which changes and which nobody discloses publicly, and a page purporting to offer it would be describing something it cannot see.
What is portable between businesses is the arithmetic. The fee structures are consistent even when the numbers are not, so knowing what each fee is charged on and how to combine them is worth more than any table of headline rates.
Reviewing
The annual conversation nobody has.
Facility pricing is set at the point a business is newest and least proven to that funder, and it is rarely adjusted afterwards without being asked. A business two years further on, with a cleaner ledger, lower dilution and a longer record, is a different credit proposition from the one that signed.
The conversation is straightforward. What has improved, what the volume now looks like, and what pricing that supports. A funder that values the relationship will engage with it, and one that will not has told the business something useful about whether to look elsewhere at the end of the term.
The preparation that makes it work is the same information the funder already has: the ageing trend, the dilution figure and the volume history. Presenting those as an improvement rather than asking for a discount is what turns it into a commercial conversation rather than a request.
A worked comparison
Two proposals that look the same and are not.
Funder A quotes 1.10% per 30 days and a 0.55% service fee. Funder B quotes 1.25% and 0.25%. On the headline discount rate, A looks cheaper by a clear margin, and a comparison commonly stops there.
On $3m of annual invoice volume with an average advance of $340,000, A costs roughly $53,900 in discount fee and $16,500 in service fee, which is $70,400. B costs roughly $61,200 and $7,500, which is $68,700. B is the cheaper facility despite quoting the higher rate, because the service fee is charged on a base nine times larger than the difference in rate applies to.
Reverse the volumes and the answer reverses too. A business drawing heavily against a modest invoice volume is better served by A, and one putting through high volume with a low average draw is better served by B. That is why the total, on the business’s own numbers, is the only comparison that means anything.
Reading a proposal
What a good proposal contains, and what a thin one omits.
Present in a complete proposal
- The discount fee, stated with the period it is charged over
- The service fee, with the base it is calculated on stated explicitly
- Every standing charge, including line, minimum and audit fees
- The advance rate and the eligibility rules that determine the usable limit
- The minimum term, the notice period and any termination cost
Commonly missing
- An annual equivalent for a rate quoted per thirty days
- The minimum service fee, and the volume it assumes
- The recourse period, which changes what risk the business keeps
- How concentration is capped, which sets the real facility size
- A total in dollars on the business’s own volume over twelve months
Where costs appear later
Three ways a facility costs more than the proposal implied.
None of these is concealed. All three sit in the agreement rather than the proposal, and each has surprised a business that read only the front page.
Volume falls below the minimum
A quieter quarter takes invoicing below the volume the minimum service fee assumes, and the fee is charged as though the floor had been met.
What happens:A facility whose effective rate rises sharply at exactly the point the business is using it least, which is the opposite of how it was expected to behave.
Collections slow
The discount fee accrues per day outstanding, so a ledger drifting from 45 days to 60 raises the largest component of the cost by a third without any change in volume or in the rate.
What happens:A cost increase driven entirely by customer behaviour, which is why collections work pays for itself twice over on a funded ledger.
Dilution rises
Credit notes and short payments increase, and the funder responds at review by reducing the advance rate or adjusting the price.
What happens:Less money available on the same ledger, from a cause that is operational rather than financial and is fixable at its source.
All three are visible in the business’s own numbers before they appear on an invoice from the funder. Watching volume, average collection days and dilution monthly is what turns each of them into an adjustment rather than a surprise.
The largest component
What the drawn balance costs.
The discount fee is the largest component in most facilities, and this is its shape. The service fee and the standing fees sit on top of it. Indicative only, and not a quote or offer of credit.
Indicative interest cost
Weekly
$337/week
$1,458 /month $17,500 a year while drawn
$250,000
$5,000 $500,000
$125,000
Nothing drawn Fully drawn
14.00% p.a.
8% (secured) 30% (unsecured)
Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.
Sending to Prospa
Your $250,000 scenario
$125,000 drawn at 14.00% . Prospa will ask a few quick questions, then provide a firm quote and funding if eligible.
Redirecting…
References
Sources
- Commerce Commission
The regulator whose guidance covers fee disclosure and misleading representations about cost.
- Fair Trading Act 1986
The statute behind the prohibition on misleading representations about the price of a service.
- Financial Service Providers Register
Where a New Zealand funder’s registration can be confirmed before a facility is arranged.
- Personal Property Securities Register
The register whose search and filing fees appear as disbursements on a facility.
- Financial Markets Authority, financial advice
Backs the distinction between general information of this kind and regulated financial advice.
FAQ
Questions, answered
What are the two main fees?
A discount fee charged on the amount advanced for the days it is outstanding, which behaves like interest, and a service fee charged on the face value of invoices put through, which behaves like a transaction charge.
Why is a rate per 30 days misleading?
Because it measures a month rather than a year. Roughly twelve times the figure gives an annual equivalent before compounding, so 1.15% per 30 days is nothing like 1.15% a year, and the convention makes quotes look far cheaper than they are.
Which fee is largest?
Ordinarily the discount fee, because it accrues on a large advance for the whole period an invoice is outstanding. The service fee is usually second and is larger than it looks, because it is charged on face value rather than on the advance.
What are the fees that appear later?
Line or facility fees, minimum service fees, audit and review fees, set-up costs, disbursements and termination fees. They live in the agreement rather than the proposal, and several are charged whether or not the facility is used.
How do I compare two quotes?
By asking each funder for the total cost in dollars over twelve months at a stated invoice volume and a stated average collection period, with all fees included. Those two numbers are directly comparable and headline rates are not.
What is a minimum service fee?
A volume floor. Where actual invoicing falls below it, the fee is charged as though the floor had been met, which makes a lightly used facility considerably more expensive than its rate suggests.
What determines the price a business is offered?
Customer quality, concentration, dilution and volume, in roughly that order. Who owes the money matters more than who is borrowing it, which is the property that makes receivables funding available to businesses that could not borrow unsecured.
What is dilution?
The gap between the face value of a ledger and what it actually converts to, caused by credit notes, rebates, settlement discounts and short payments. High dilution reduces the advance rate and raises the price.
How can the cost be reduced?
Collecting sooner is the largest lever, because the discount fee accrues per day outstanding. Reducing dilution is second, and reviewing pricing annually is third and the most commonly neglected.
Is it expensive compared with a bank facility?
Per dollar, yes. The comparison that matters is against what the business could actually obtain, and a facility that is expensive against a bank line it cannot get is cheap against the short-term lending it can.
Does the cost fall as the business grows?
The discount fee scales with borrowing and the service fee scales with turnover, so growth increases the total even where the rate improves. Pricing is ordinarily reviewed periodically, and asking for a review after two strong years is reasonable.
Is this guide financial advice?
No. It explains a pricing structure in general terms. This site is not a lender, a broker or a registered financial adviser, and what a particular business is offered depends on facts a website cannot see.
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