All funding products

Invoice finance.

Invoice finance is a way of borrowing against unpaid B2B invoices. The lender advances most of the value the moment an invoice is raised, then settles the rest — less their fee — when your customer pays. It is funding against a specific asset, your receivables, which means availability rises and falls with your sales ledger.

The basics

What is invoice finance?

You raise an invoice for £100,000 on 60-day terms. Within 24 hours, the lender pays you around £85,000. When the customer settles 60 days later, the lender takes the £100,000, deducts a fee of perhaps £750–£3,000, and pays you the balance.

It's not a loan against your business. You are essentially selling your invoices to the invoice financier at a discount. There are two main flavours:

• Factoring — the lender manages collections and your customers know about the facility. Common in smaller SMEs and recruitment.
• Invoice discounting — you keep control of credit control and the facility is confidential. Used by larger or more established businesses.

A hybrid variant — CHOCs (Client Handles Own Collections) — sits between the two: your customer is aware of the facility, but you control the collections activity.

A less common product, selective invoice finance, lets you fund individual invoices rather than your whole book. It's more expensive per invoice but avoids the long-term commitment of a whole-turnover facility.

Fit

When it works well.

Invoice finance fits a specific shape of business. It works when:

• You sell B2B on credit terms of 30 days or longer.
• Your customers are creditworthy, ideally a mix rather than one or two large names.
• Your sales are growing or at least stable.
• You have working capital tied up in invoices you'd rather have as cash.
• Margins are healthy enough to absorb a 1–3% drag on turnover.

The classic users are recruitment agencies funding payroll while waiting for clients to pay, manufacturers buying materials before getting paid for finished goods, and wholesalers with long payment cycles. It's particularly powerful when growth is the constraint — most lenders scale the facility as your invoice book grows, so funding keeps pace with sales rather than capping it.

The honest part

When it's a bad idea.

Invoice finance is wrong far more often than people admit. Avoid it when:

• Your sales are declining. Funding shrinks with the book, and the facility becomes a liability rather than a support.
• You sell B2C or via card payments. There's no invoice to fund.
• You issue contractual or staged invoices. Construction, IT projects, anything with retentions, milestones, or contra accounts will get heavily discounted or refused.
• Your margins are thin. A 2% turnover fee on a 5% margin business is 40% of your profit. The numbers don't work.
• You're using it to plug a structural hole. If the business doesn't make money, faster cash just helps it lose money faster.

The other thing operators underestimate: invoice finance is sticky. Most facilities have 12-month notice periods and termination fees. Once you're in, getting out is a six-to-twelve month exercise. Treat the decision to enter as a multi-year commitment.

Cost

Real costs.

Pricing has two main components.

Component	Typical range
Service fee — invoice discounting (£2m+ turnover)	0.5%–1.5% of turnover
Service fee — factoring (smaller books, higher-risk sectors)	1.5%–3% of turnover
Selective invoice finance, per invoice	1.5%–4%
Discount fee (interest) on funds drawn	2.5%–5% over Bank of England base rate
Setup fee	£500–£3,000
Audit fees	£500–£1,500 per visit
Minimum fee	Kicks in if turnover drops below threshold

At a Bank of England base rate of 4.5%, the discount fee equates to roughly 7%–9.5% APR on the drawn balance.

Operational reality

Speed, complexity, certainty, flexibility.

Speed

Slow to start, fast to use. Setup typically takes 2–8 weeks (longer for first-time facilities). Once live, advances arrive within 24 hours of raising an invoice — often the same day.

Complexity

Medium to high. You'll need clean management accounts, debtor reports, customer information, and often personal guarantees. The lender will run periodic audits of your sales ledger. Operationally, your finance team has more reconciliation to do every month.

Certainty

Reasonably high once the facility is live, but with caveats. Lenders can reduce concentration limits, exclude individual debtors, or apply reserves if your ledger deteriorates. The headline facility size and the actual availability are often different numbers.

Flexibility

This is the real strength. Funding scales with your invoice book, so growth isn't capped by a fixed credit limit. The weakness is the inverse: if sales fall, available funding falls with them — often at the worst possible moment.

In the market

Who actually uses it.

Invoice finance is most common in:

• Recruitment — funding contractor payroll while clients pay on 30–60 day terms.
• Manufacturing — bridging the gap between raw material purchase and customer payment.
• Wholesale and distribution — funding stock cycles.
• Transport and logistics — large fleets with predictable B2B billing.
• Print, packaging, and engineering services — project-based with reliable end customers.

Typical user profile: start-up to £50m turnover, B2B, profitable or with a path to profit using the cash generated by the facility, with at least £50,000 of debtors outstanding at any time. Above £20m, businesses tend to graduate towards asset-based lending or revolving credit.

Other options

Alternatives.

• Term loan or revolving credit facility — better for predictable working capital needs without ledger admin.
• Business overdraft — simpler and cheaper for small needs, but capped and increasingly hard to get.
• Selective invoice finance — pay-as-you-go version with no long-term commitment, but costly and few providers.
• Asset-based lending — broader facility for larger businesses with stock, plant, and property as well as receivables.
• Supplier finance — your large customers may already offer this, often at lower cost.
• Equity — more expensive long-term, but doesn't create operational drag.

Summary

Summary.

Invoice finance is a powerful tool for B2B businesses with growing receivables and healthy margins. It frees up working capital tied in invoices and scales with growth. It can be expensive, operationally heavy, and difficult to exit — but it also provides operational support through credit control, credit management, and reconciliation.

Use it when you're solving a working-capital problem in a fundamentally healthy business.