Guide to Invoice Finance

All you need to know when financing invoices

If you require Invoice Finance please fill in this form

Why choose a Guide to Invoice Finance

Invoice Discounting

  • The finance arrangement remains confidential and your Debtor never knows about it
  • Finance is usually provided by a bank
  • Up to 90% of the invoice is available a few days after you raise the invoice
  • You retain control of your sales ledger
  • Once the facility is arranged the finance available grows in line with your business without need for constant renegotiation (as would be the case with a Bank overdraft)
  • Invoice Discounting is aimed at larger businesses and generally only available to companies with a turnover of £500k+


Here you "sell" your invoice to a factoring company for an agreed discount. They then contact the Debtor to receive payment in full.

  • Factoring can be both Recourse (the Factor can come back to you if a debt isn't paid) or Non-Recourse (if a debt isn't paid the Factor carries the loss)
  • In essence, these companies are providing a finance, ledger management and debt collection service
  • Not only does this improve cash flow but it also reduces overheads
  • However a fee is charged in addition to an agreed finance discount on the invoice value
  • One thing to note is that a Factor may be able to provide you with valuable credit information about your customers
  • Factoring is generally available to companies with an annual turnover of £50k+ but some factors will consider start-ups

In both cases the bank/finance company will likely want to visit your premises, learn about your business and your credit control procedures to evaluate your suitability. Such checks will also be carried on periodically too.

Fees are in the form of an annual management fee (0.75-2.5% of turnover) and a per transaction charge reflected in the discount applied to the invoice (1.5-3% over Base rates, charged daily). Generally, Invoice Discounting has lower fees as you continue to manage the sales ledger and credit control yourself, and with Factoring the security that comes with Non-Recourse factoring also incurs a credit charge making it more expensive than Recourse factoring.

Frequently Asked Questions

Frequently Asked Questions

What percentage of my invoice can I fund up front?    

It depends on your business but up to 90% is possible.

What security is required?    

This depends on which type of Invoice Finance you choose. If you go for Factoring or Invoice Trading then likely no security is required. Invoice Discounting usually requires a floating debenture over your business.

I'm already with someone for my Invoice Finance; is it easy to switch providers?    

Yes, it happens all the time.

Is it possible to get Invoice Finance for start-ups?    

In some cases yes, it depends on your business and your projected turnover.

Do finance providers require Personal Guarantees?    

No, not always. The finance is secured against your debtor ledger and assuming this is adequate, a PG may not be required.

Will it make my business look bad if I have Invoice Finance?    

No, over 40,000 UK SMEs use invoice finance and it merely shows that you are prudently managing your cash flow. That should give all your customers and suppliers more confidence in your business.

Is it possible to get Bad Debt protection or Credit Insurance?    

Yes, one of our Invoice Finance specialists can arrange this for you, as either part of your facility or separately.

If my business is in the construction industry, can I still get Invoice Finance?    

Yes, there are some specialist lenders in this area.

My debtors are all overseas; can I still get Invoice Finance?    

Yes. We have providers that will arrange Invoice Finance for overseas debtors.

How much does Invoice Finance cost?    

This depends on which option you choose (Factoring, Invoice Discounting or Invoice Trading) but there is usually a facility fee of 0.5-2.5% and also a charge for the finance on each invoice (again anything from 1-3% over BBR).

What is needed to apply

Applying for invoice finance is very easy. Below are listed the things you need in order to apply.

  • Eligibility CriteriaGood debtor book and ideally an established business with good credit.
  • Documents RequiredFinancial statements, Debtor ledger.
  • Additional CommentsOne thing to consider is 'concentration risk' i.e. if most of your revenue comes from a few clients. Not all invoice finance providers will like this but we'll guide you to one who will.

One of the biggest arms of growth in finance to SMEs in recent years has been invoice finance. There was a time when only large firms financed their invoices but now, due to increased competition, it has become available to a wide range of firms in all sectors and at all levels of turnover. the key thing is the quality of your debtor book. If you have strong customers that you are invoicing then lenders will queue up to fund you, meaning you get better rates. Call us on 01494 410 125 to discuss.

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