Which term refers to the fee charged by lenders for invoice financing?

The term that refers to the fee charged by lenders for invoice financing is the factoring fee. This fee is specifically associated with the process of selling invoices at a discount to a third party, known as a factor, who provides immediate cash flow to the business. It compensates the factor for taking on the risk of collecting the invoice and for their service in managing the accounts receivable.

In the context of small business financing, understanding the factoring fee is crucial as it directly impacts the cost of obtaining immediate cash for outstanding invoices. Businesses often utilize invoice financing to maintain liquidity, and being aware of the associated fees helps them evaluate whether this financing option is financially viable compared to other funding sources.