Most businesses look at the front page of a finance agreement and think they have the full picture. The headline fees look sensible, the percentages look acceptable, and everything seems above board. But sometimes the real story sits deeper in the document Ts & Cs and it’s rarely in your favour.
I sat with a client recently and went line by line through a long invoice finance agreement. The front sheet had the normal items you’d expect to see – service fees and discount charges – nothing unusual and nothing to cause alarm. The problem appeared eight pages later in the standard conditions. Hidden halfway down a paragraph was the real cost – a clause that it turned out had quietly been draining thousands of pounds a year from the business.
Where the real cost hides
The charge related to value days. It sounds harmless, almost technical, but in reality it means you are charged interest for days when you do not have the money and you do not benefit from the money either. When you draw down funds you can be charged interest from four days earlier. When your customer pays into the lender you might not see that money for six days because the lender is holding it. While they hold it they gain the benefit – you pay the cost. It happens both ways and it adds up quickly.
In this case the client had a facility of around £2.5 million on average. A small change in value days produced a large result – they were paying more than £7,000 of extra interest every year. Over the life of the facility the additional cost was comfortably into six figures and NONE of this was declared on the front sheet. None of it was obvious – and all of it was avoidable.
This is not a one off – it’s not rare, it’s simply something most businesses never spot because they assume the headline charges are the full story.
What value days really mean for your business
Here is how value days hit you in practice.
- You pay interest before you have received the money
- The lender earns interest on money that already belongs to you
- Outbound and inbound delays work against you at the same time
- Larger borrowing lines multiply the impact straight away
- The charges rarely appear clearly on the front sheet
When challenged some lenders even struggle to show signed documentation, and in more than one case lenders have settled out of court rather than defend the clause. That says everything about how confident they are when the detail is exposed.
This matters even more for larger businesses that use invoice finance heavily. The bigger the line, the bigger the jump in unwanted cost. What looks small on paper turns into money that could have paid for staff, machinery or essential investment. It is real money leaving your business without you seeing it happen.
My advice is simple – never assume the front sheet is the full picture. Always read the terms properly or give them to someone who will. If you see value days buried in the document, work out what they mean in pounds and pence – the impact can be significant. If the clause was never properly signed or disclosed, you may even have grounds to challenge the cost and recover it. We’ve seen that happen.
At Able we spend a lot of time helping clients understand what they are paying for. Not the glossy version on page one, but the real version buried further down. We highlight these things and build the right structure around them – businesses deserve clarity and they should not be paying for things they didn’t know existed.
If you want us to review an agreement you already have, send it over. We will tell you exactly where you stand and what the hidden costs are. No fuss and no surprises – just the truth so you can make a proper decision.
