By Daniel Hunter

UK banks are charging businesses in need of short-term finance £425m a year in “hidden” extra fees, according to a new report.

Research by MarketInvoice found that 26,000 businesses face up to 35 different hidden fees within invoice finance contracts with banks. UK businesses are being charged £758m per year for invoice finance, £425m more than the cost of using peer-to-peer providers.

Extra charges range from fees for handling paperwork to extra costs for making same-day payments.

David Postings, CEO of Bibby Financial Services, said: "There is no doubt that the banks could do more to improve the transparency of their fees and treat small businesses fairly. But it is wrong to say that UK SMEs are faced with a simple dichotomy between the big banks on the one hand and emerging peer-to-peer lenders on the other. UK SMEs have a number of financing options available to them, including thriving independent funders."