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Definition
The service fee in invoice finance is the charge for administering the facility — managing the ledger and, in factoring, collecting the debts. Usually a small percentage of turnover, it covers the service rather than the cost of the money, which is the discount charge.
In plain terms
It reflects the work involved: factoring, where the financier collects, tends to carry a higher service fee than confidential discounting, where you still collect. Together with the discount charge it makes up the total cost.
Why it matters
Weighing the service fee against the value of outsourced credit control helps decide between factoring and discounting. See discount charge.
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