Invoice Finance

Invoice finance means using unpaid B2B invoices to release cash before your customer pays. A lender advances part of the invoice value, then the facility is settled when the customer pays.

Factoring means the lender manages your sales ledger and collects payment from customers, so your customers know about the facility. Discounting lets you keep credit control, so the arrangement is confidential. Discounting can advance up to 100% of the invoice value and factoring up to 90%, usually within 24 hours.

Confidential invoice finance is another name for invoice discounting. The lender advances funds against your invoices, but the arrangement stays hidden from your customers. You manage credit control and collect payments as normal, so customers see no change. Some lenders also offer CHOCS (Customer Handles Own Credit Service), where the facility is disclosed to your customers but you retain credit control and collect payments yourself.

Invoice finance companies vary by facility type, advance rate, fees, minimum turnover, sector appetite and how they handle credit control. A specialist broker can help compare which providers are suited to your invoices before you apply.

Indicative decisions are usually possible within a few working days. Setting up a full facility typically takes a few working days, after which you can draw funds against new invoices within 24 hours. Some selective lenders can set up facilities in as little as 24 hours.

No. Selective invoice finance and spot factoring let you choose individual invoices to fund. Whole-ledger facilities fund all qualifying invoices, but they can offer better rates for higher volumes.

With invoice discounting, the arrangement is confidential and your customers do not need to know. With invoice factoring, the lender contacts your customers to collect payment, so the facility is disclosed.

Two charges typically apply. A service fee, usually 0.1% to 3% of turnover, covers the lender costs. Confidential discounting sits at the lower end of that range and factoring, which includes credit control, at the higher end. A discount charge, usually 1.75% to 3.5% above Bank of England base rate, applies to funds you draw. Exact pricing depends on volume, customer credit quality and facility type.

Yes, in some cases. Eligibility depends partly on your customers creditworthiness, invoice values and payment terms. Selective invoice finance is often more flexible for smaller or newer businesses.

It can be suited where a recruitment agency invoices business clients on credit terms and needs to cover payroll before customers pay. A specialist can guide which facility fits the agency model and payroll cycle.

It can be suited to construction subcontractors with clear B2B invoices and longer payment terms. Retentions, applications for payment and disputes can affect lender fit, so specialist guidance is useful before applying.

Invoice finance itself is not typically subject to the same product-level conduct rules as some retail lending, but many reputable providers are members of UK Finance and follow its Standards Framework.

It depends on your facility. With recourse facilities, you are liable if a customer does not pay. With non-recourse or bad debt protection, the lender absorbs the loss. Confirm which type you have before signing.

Whole-ledger factoring and discounting typically have minimum terms of 6 to 12 months. Selective invoice finance and spot factoring are usually pay-as-you-go with no minimum commitment.

Bad debt protection is an optional add-on that protects you against customer non-payment. The lender absorbs the loss instead of clawing back the advance from you. It adds to the cost of the facility but reduces your risk.

The advance rate is the percentage of an invoice the lender releases to you upfront, typically 80% to 90%, and up to 100% on some confidential discounting facilities. The remainder, less the agreed fees, is paid to you once your customer settles. On a £50,000 invoice at a 90% advance rate you receive £45,000 immediately and the £5,000 balance later. The rate is set by the lender based on your sector, your customers' credit quality and your payment history, not chosen by you.

A concentration limit caps how much of your funding can come from a single customer, commonly 25% to 40% of the ledger. If one customer accounts for more than the limit, invoices above it are either funded at a reduced rate or not funded at all. Lenders apply it because a ledger dominated by one debtor carries more risk. It is the most common reason a business is surprised by how much a facility actually releases, so it is worth raising early if you have one large customer.

No. A loan adds debt with fixed repayments. Invoice finance is an advance against money you are already owed, repaid automatically when your customers pay. It scales with sales rather than sitting as a fixed facility.

Sectors with long payment terms and high working-capital needs often use invoice finance, including recruitment, manufacturing, wholesale, logistics, construction subcontracting and professional services.