Invoice finance
A facility that advances most of an invoice's value as soon as it is raised, with the balance paid over when your customer settles, less the lender's charges.
If your customers pay in sixty days and your suppliers want paying in thirty, this is the facility built for exactly that gap. It also has a quality most funding does not: the limit grows with your sales ledger, so the funding keeps pace as the business does rather than needing renegotiating every time you win more work.
The parameters
Where this product sits.
Ranges across the market, so you can sanity-check any quote — ours or anyone else’s — before you take it seriously.
- Advance rate
- 80–90%
- Paid within 24 hours of the invoice being raised. The remainder, less charges, follows when the customer pays.
- Service fee
- 0.1–3%
- Of turnover. The wide range is the difference between discounting, where you do the credit control, and full factoring, where the lender does.
- Discount charge
- Base + 2–5%
- Interest on the funds actually drawn, charged daily. This is the part that behaves like an overdraft rate.
- Concentration limit
- 25–40%
- The maximum share of the ledger one customer can represent before the excess stops being funded.
- Minimum turnover
- £50k–£250k
- Selective and spot facilities go lower, at a higher unit cost.
These are indicative market ranges rather than a quotation — they are here so you can sanity-check any offer you are shown. Your own terms will be priced on the asset, the borrowing entity, your trading history and the exit, and we will put real figures in front of you on the first call.
Typical cases
What it is used for.
Growth that outruns cash
The classic case. Winning a larger contract means paying wages and suppliers for months before the invoice settles, and a growing order book can put a profitable business out of business.
Recruitment and staffing
Weekly payroll against monthly or 60-day client terms. This sector is close to unworkable without invoice finance and lenders understand it well.
Construction and contracting
Applications for payment, retentions and long certification cycles. Specialist construction facilities exist that understand these and price them properly.
One-off large invoices
Selective or spot factoring funds a single invoice without committing the whole ledger. Dearer per invoice, but no long contract behind it.
In detail
How it works in practice.
Factoring or discounting — who talks to your customers
With factoring, the lender takes over the sales ledger. They issue statements, chase payment and receive the money. It is disclosed, so your customers know, and for a small business without a credit control function it removes a real burden and often improves collection times.
With invoice discounting, you keep the ledger and the customer relationship, and the arrangement is normally confidential. Your customers pay into an account in your name that the lender controls, and they never know a lender is involved. It requires you to have credible credit control, and lenders will want to see your systems before agreeing to it.
The choice is often made for you. Below roughly £500,000 of turnover, or with weak ledger controls, most lenders will only offer factoring. Above that, with clean reconciliation and a proper aged debtor report, discounting is usually available and cheaper.
Recourse, and who carries a bad debt
On a recourse facility — the default — if your customer never pays, the funding for that invoice is clawed back after an agreed period, typically 90 or 120 days. The credit risk stays with you. This is the cheaper option and the more common one.
Non-recourse adds bad debt protection: the lender, or an insurer behind them, absorbs the loss if an approved customer becomes insolvent. It costs more and it is not unconditional — cover applies to approved debtors up to set limits, and disputes over quality or delivery are usually excluded entirely.
Read what triggers cover before paying for it. Protection that pays out on customer insolvency but not on a customer who simply refuses to pay is worth much less than it sounds, and slow payment is far more common than insolvency.
The costs people miss
The two headline charges are the service fee and the discount charge, and both are usually quoted clearly. The rest are not always: audit fees for periodic ledger inspections, a minimum monthly fee whether or not you draw, refactoring charges on invoices unpaid past their due date, and a termination notice period that is often three months and sometimes twelve.
Concentration limits catch people out more than any of those. If one customer is 60% of your ledger and the limit is 35%, a large part of your biggest invoice simply is not funded — precisely the invoice you needed funded.
We ask for the full fee schedule and the notice period in writing before recommending a facility, and we compare the total annual cost against your actual ledger profile rather than against the headline percentages.
Before you sign
Four things worth checking.
Notice periods
Twelve-month contracts with three months' notice are standard, and some run longer. Leaving early can cost a termination fee equivalent to months of minimum charges.
Minimum monthly fees
Payable whether or not you draw. On a facility taken as a safety net rather than a working tool, that is real money for nothing.
Disapproved invoices
Invoices to a debtor over the concentration limit, in dispute, or beyond terms are simply not funded. Your available cash is the approved ledger, not the whole one.
It is hard to unwind
Once your working capital depends on invoices being funded on day one, coming off the facility means finding that cash somewhere. Plan the exit at the outset.
With factoring, yes — it is disclosed and the lender contacts them directly for payment. With confidential invoice discounting, no; they pay into an account in your business name and nothing identifies the lender.
In practice the stigma is largely historic. Invoice finance is standard in recruitment, haulage, manufacturing and construction, and most credit controllers have dealt with it many times.
Once the facility is running, usually within 24 hours of uploading the invoice, and same-day with many lenders.
Setting the facility up takes longer — one to three weeks — because the lender reviews your ledger, verifies a sample of invoices and takes a debenture.
Yes. Selective or spot factoring funds individual invoices with no obligation to put the rest of the ledger through and usually no long contract.
It costs more per invoice than a whole-turnover facility. For an occasional large invoice that is usually still the right trade.
On a recourse facility, after an agreed period — commonly 90 to 120 days past due — the advance on that invoice is recovered from your available funds. You carry the loss.
On non-recourse, an approved debtor's insolvency is covered up to the agreed limit. Disputes are almost always excluded, so a customer withholding payment over a quality issue is your problem either way.
Usually yes, but the debenture matters. The invoice financier will normally want a first charge over the book debts, so any existing lender with a debenture must agree to a deed of priority.
That is routine and we handle it, but it adds time. Flag any existing debenture at the first conversation.
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