Invoice Financing

Struggling with cash flow due to long payment terms? Invoice finance unlocks cash tied up in unpaid invoices, giving you up to 99% of their value upfront - no more waiting 30-120 days for invoices to be paid.

WHAT IS REQUIRED

Must be B2B

Latest full accounts

Up to date management accounts

Details of your outstanding invoices (accounts receivables)

Copy of contracts (if income is contractual)

WHY CHOOSE IT?

Improve cash flow

No need for assets - secured against your outstanding invoices

Flexible options to suit the needs of your business

Scale with your sales - Funding can grow with your business

Reduce credit risk - Some providers offer bad debt protection

Enables faster growth

What is Invoice Finance?

Invoice Finance is a flexible funding solution that helps businesses unlock cash tied up in unpaid invoices. Instead of waiting 30, 60, or even 90 days for customer payments, businesses can access a percentage of their invoice value upfront, improving cash flow and keeping operations running smoothly.

This type of financing is ideal for businesses that offer credit terms to customers and need a reliable way to manage cash flow gaps caused by slow-paying clients.

There are two main types of Invoice Finance:

Invoice Discounting

This is probably the most straightforward option with Invoice Financing. You sell unpaid invoices to a lender and they give you a percentage of the value. Once paid, the lender pays you the remaining balance minus their fee. You are essentially using your invoices as collateral for a loan to keep your cash flow in check.

Invoice Discounting means that everything will be financed automatically and up front. The difference with this product over others is that the invoice financier wouldn't manage your sales ledger or collect debts on your behalf, so you are responsible for collecting debts and remaining the point of contact for your customers which is attractive for many business owners. You stay in control of your sales ledger, collecting payments and sending out reminders in the usual way.

Invoice Factoring

Invoice Factoring (also known as debt factoring or just factoring) works in a very similar way to invoice discounting, aside from you are not responsible for collecting the debts from your customers. This frees up your time to focus on other important areas and to keep everything ticking along nicely.

As with Invoice Discounting, you give the lender (or factor) your invoices and they will give you a percentage of the invoice's value to solve your cash flow issue. The lender will then chase up and collect the debts directly from your customers on your behalf and once paid, you'll be paid the remaining balance minus their fees.

This is an excellent option for growing businesses without an in-house credit control team. It offers a cost-effective way to manage credit control, allowing you to avoid the expense of hiring additional staff to manage this process.

Both options provide working capital without taking on additional debt, allowing businesses to operate more smoothly without waiting for invoices to be paid.

Nowadays, invoice finance has adapted massively and there are now lots of hybrid options available, including:

Selective Invoice Finance, or Spot Factoring (select which debtors you want funded)
Single invoice finance (advance funds from one singular invoice)
Asset-Based lending (Revolving line of credit based on the size of your debtor book)

How does Invoice Finance work?

Once Invoice Finance terms have been agreed:

Raise an Invoice – You issue invoices to your customers as usual.
Access Funds Quickly – The lender advances up to 99% of the invoice value (usually within 24 hours).
Customer Pays – Your customer pays the invoice on agreed terms.
Receive the Remainder – Once the invoice is paid, the lender releases the remaining balance, minus their fee.
Continue Submitting Invoices – As new invoices are raised, you can draw down funds as needed, up to the agreed limit.

Is Invoice Finance suitable for my business?

If unpaid invoices are restricting your growth, Invoice Finance can provide a reliable, scalable solution.

Invoice Finance is a great option for businesses that:

Struggle with cash flow due to slow-paying customers.

If your business is profitable but held back by late payments, this can bridge the gap.

Need fast access to working capital.

Rather than waiting weeks or months for invoices to be paid, Invoice Finance unlocks cash within 24 hours.

Operate on credit terms.

Businesses offering 30+ day payment terms to customers can benefit from improved cash flow.

Want to grow but are held back by limited cash flow.

Instead of waiting for customer payments, businesses can reinvest in stock, staff, or operations sooner.

Industries that frequently use Invoice Finance include:

Recruitment agencies (paying staff before client payments arrive)
Manufacturers and wholesalers (managing large order volumes)
Transport and logistics (covering fuel and operating costs)
Construction firms (dealing with staged payments)

What is required for an application?

To apply, you'll typically need:

Invoices issued to other businesses (B2B transactions)

Creditworthy customers (as lenders assess the reliability of the invoice, rather than your business)

Minimum annual turnover, or estimated turnover, of £100,000 per annum

Business financials documents (such as bank statements and accounts)

Aged Debtor Report

No collateral is required, as funding is secured against your outstanding invoices. In most cases, a personal Guarantee and debenture is required.

FAQs

What percentage of my invoice can I fund up front?

Lenders typically advance 85-99% of the invoice value, with the remainder paid once the customer settles the invoice. If you are in the construction industry, or have a high debtor concentration, then your advance rate may be less (50-60%).

What security is required?

Invoice finance is typically secured against the invoices themselves, meaning no personal or business assets are required. However, a debenture is usually placed on the business, which means that the lender has a charge over the business’s assets, giving them priority if the company becomes insolvent. Some lenders may also require a personal guarantee. Security requirements vary, so it’s worth comparing lenders to find the right fit for your business.

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

Yes, it’s very easy and it happens all the time. There could be a number of reasons why you might consider switching to another provider. Perhaps you’re unhappy with the level of service or you’re searching for a more cost-effective deal. The good news is that despite what people may assume, switching providers is not a lengthy process.

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

In some cases yes, but it all depends on your business and your projected turnover as this will be taken into consideration when going through this process. Not all providers deal with start-ups, but there are providers out there that do.

Do finance providers require Personal Guarantees?

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

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

No, not at all. This is a common misconception. Over 40,000 UK SMEs use Invoice Financing and it merely shows that you are prudently managing your cash flow. If anything, 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 Financing specialists can arrange this for you, as either part of your facility or separately. It’s important that you have the protection in place, just in case your customer cannot settle their invoices. Some lenders may also require this protection.

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

Yes, but it can be more challenging. Many lenders are hesitant to offer invoice finance for construction businesses due to stage payments, contractual disputes, and retention clauses that can delay or reduce invoice payments. However, some specialist lenders do provide Construction Invoice Finance, which works similarly but is tailored to the industry. They may fund applications for payment or certified invoices rather than standard invoices. If you’re in construction and need invoice finance, you’ll likely need a lender with industry expertise and flexible terms.

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

Yes - for debtors overseas, international factoring (or export finance as it is sometimes referred to) is the best solution. It works in the same way, except that the UK factor works directly with agents in the country that the invoice is issued to. We have plenty of providers that will arrange Invoice Financing for overseas debtors, so get in touch with us to find out more.

How much does Invoice Financing cost?

The cost of invoice finance depends on the type of facility you choose—Factoring, Invoice Discounting, or single invoice financing. Fees typically include: 1. A service fee – A percentage of your invoice turnover. 2. An interest charge – Applied to the funds advanced. Factoring tends to be more expensive as the lender handles credit control on your behalf. Costs vary by lender, so always check the full fee structure. Watch out for disbursement costs, as these hidden charges can make an initially low-cost facility more expensive than expected.

How quickly can I receive funds?

Once approved, funds can be available within 24-48 hours of submitting an invoice.

Will my customers know I’m using Invoice Finance?

Whether your customers know you’re using invoice finance depends on the type of facility you choose: - Disclosed Invoice Finance – Your customers will be aware, as the lender collects payments directly. - Confidential Invoice Finance – Your customers won’t know, as you handle collections, and payments go through your account. Some lenders may still verify invoices with your customers, so if confidentiality is important, check the provider’s process before committing.

What happens if a customer doesn’t pay?

This depends on the agreement. With recourse Invoice Finance, you’re responsible for unpaid invoices. With non-recourse, the lender takes on the risk (usually for a higher fee).

Do my bank details need to change on my invoices?

In most cases, a designated trust account will need to be set up for payments to be made to. This means your invoice payment details will likely need to be updated to reflect the new account. Your lender will provide specific guidance based on your facility agreement. If this is a deal breaker, then there are a small selection of lenders who do not have this requirement. Contact us to discuss your individual requirements.

Tailored Finance and Trusted Advice.

Call us

Email us

We're the Experts in Business Finance, So You Don't Have To Be.

Choice Loans is a broker, not a lender. We will connect you with a lender suitable for your needs or, if appropriate, a specialist broker. We do not charge you an upfront fee but, if your application is successful, a broker commission may be charged.