In contract cleaning and security, wages are typically 70% to 85% of turnover. A contractor billing £3m a year pays out £40,000 to £50,000 a week in wages, and its clients pay roughly 60 to 75 days after the work started: close to £500,000 of wages permanently in the gap between service delivered and cash received.
How FM contractors bill and get paid
Facilities management covers a wide spread of services, but the billing pattern is consistent:
- Monthly in arrears. Cleaning, manned guarding, grounds and M&E maintenance are delivered through the month and invoiced at month end as a fixed contract sum.
- Variable extras. Additional hours, call-outs, consumables and reactive repairs are added to the monthly invoice or billed on completion.
- Consolidated billing. A multi-site contract is often billed as one invoice covering dozens of sites, with a site schedule attached.
- Part-period invoices. Contracts start and end mid-month, so the first and last invoices are pro-rated.
Payment terms are set by the client: large corporates commonly impose 45 to 60 days, and public-sector clients state 30 but often take longer. A monthly-in-arrears invoice on 60-day terms means cash arrives 75 to 90 days after the first shift of the month it covers.
TUPE: the Transfer of Undertakings (Protection of Employment) Regulations. When an FM contract changes hands, the staff working on it usually transfer to the incoming contractor on their existing pay and terms, so the new contractor takes on the full wage bill from day one.
Where the cash-flow pressure comes from
- A wage-heavy cost base. Most of the cost of a contract is people, paid weekly or monthly and never later than the month they work.
- TUPE on contract wins. Winning a £1m contract means inheriting perhaps 40 staff on day one. The first invoice is raised four weeks later and paid six to eight weeks after that, so the win needs roughly £200,000 of working capital first.
- Long client terms. Property managers, retailers and public bodies set their own terms, and a contractor rarely has the leverage to shorten them.
How invoice finance fits FM billing
Invoice finance advances a percentage of each invoice soon after it is raised, turning the month-end invoice into funding available at the start of the following month rather than two months later. Several features of FM work in the contractor's favour:
- Contract length is a positive. A three or five-year contract gives the provider confidence in future invoicing; contracted billing is easier to underwrite than project work.
- Services already delivered. Monthly-in-arrears invoices are for completed work, so there is no work-in-progress problem.
- Strong debtors. Corporate occupiers, managing agents and public bodies support advance rates at the higher end of the typical 70% to 90% range.
- Easy verification. Attendance records, helpdesk logs and client-approved timesheets give proof of delivery.
What invoice finance does not do is fund the TUPE transfer itself. The first four weeks of a new contract still come from reserves; the facility shortens the gap from twelve weeks to four, which is often the difference between a win being affordable and not.
Which structures suit FM contractors
| Structure | How it works | FM fit |
|---|---|---|
| Invoice factoring | Advance against each invoice; the provider runs credit control. | Smaller cleaning and security firms without a credit controller. |
| Invoice discounting | Advance against the whole ledger; you keep collections. | Larger contractors with a finance team and turnover of roughly £500k upwards. |
| Confidential invoice discounting | As above, with clients not told. | Where tender rules or client relationships make disclosure awkward. |
| Selective invoice finance | Fund chosen invoices or clients only. | Bridging the first invoices of a new TUPE contract without committing the whole ledger. |
Part-period invoices, consolidated billing and contract terms
Part-period invoices. A contract starting on the 18th produces a first invoice for 13 days of service. Providers will fund it if it is calculated on the agreed basis and the client has accepted the pro-rata. What they will not fund is anything billed in advance: some security and maintenance agreements invoice monthly in advance, and those invoices sit outside a facility until the month has ended.
Consolidated invoices. A single £120,000 invoice covering 40 sites is one debt, but a query on one site can delay the whole payment. Providers are generally comfortable if the site schedule is attached and the client pays in full; where a client routinely short-pays, they may fund at a lower rate.
Contract terms. Some FM contracts, especially public-sector and PFI-related ones, restrict assignment of receivables or contain wide set-off rights against service credits and KPI deductions. A provider may require consent to assignment or exclude a contract with heavy set-off exposure.
Just won a contract and need to fund the TUPE transfer?
Tell us the contract value, start date and client terms and we will explain which facility types providers may consider.
Costs and limitations
Charges follow the standard pattern: a service fee of roughly 0.5% to 3% of invoice value or turnover, and a discount charge of roughly 1.5% to 5% a year over Bank of England base rate or SONIA on funds advanced. Set-up, minimum monthly and audit fees may apply; our costs guide explains each. For FM contractors specifically:
- Margins are thin. At 5% to 10% net margin, a facility costing 2% to 3% of turnover is a material share of profit, justified where it lets you take on work you could not otherwise fund.
- Long terms. On 60-day terms the discount charge is the larger part of the cost, so the margin over base rate matters more than the service fee.
- Concentration and advance billing. One client at 40% of billing may be capped at 25% to 30%, and invoices billed in advance are excluded.
- Commitment. Twelve-month contracts with three to six months' notice are common.
Illustrative example A security contractor funding a monthly invoice
A manned guarding company raises a consolidated monthly invoice of £150,000 to a property-management client on 60-day terms, using invoice discounting at an 85% advance rate.
- Monthly invoice value
- £150,000.00
- Initial advance (85%)
- £127,500.00
- Service fee (0.6% of invoice value)
- £900.00
- Discount charge (approx. 7% a year on advance for 60 days)
- £1,467.12
- Balance released when client pays
- £20,132.88
- Total received from facility
- £147,632.88
The contractor has £127,500 within days of raising the invoice, covering the next month's wages of around £120,000 on the contract, for a total cost of £2,367.12, about 1.6% of the invoice.
Figures are illustrative estimates only and do not represent a finance offer. The discount rate assumes a 4% reference rate plus a 3% margin; actual advance rates, fees and terms vary by provider and circumstances.
Eligibility notes for FM businesses
The general criteria are on the eligibility page. For FM contractors, providers typically want signed contracts for the main clients, evidence of service delivery, a ledger that separates in-arrears from in-advance billing, and a payroll up to date with HMRC. PAYE arrears are a common reason for FM applications to be declined, because they suggest the wage gap has already been bridged by the tax bill.
Frequently asked questions
Can a cleaning or security company use invoice finance?
Yes, and both are well-established sectors for it. Cleaning and guarding contracts bill business customers monthly in arrears for services already delivered, which is exactly the kind of verifiable invoice providers fund. The main checks are proof of delivery and that the contract does not restrict assignment.
Are long-term FM contracts an advantage or a problem for a facility?
An advantage. A three or five-year contract with a creditworthy client gives the provider confidence that invoices will keep being raised and paid for the life of the facility.
Can I fund an invoice for part of a month?
Usually, as long as the service for that part-period has been delivered and the invoice is raised on the agreed basis. What providers will not fund is an invoice raised in advance for a month that has not yet happened.
How does TUPE affect invoice finance?
TUPE means that when you win a contract you inherit the outgoing contractor's staff, so wage costs start on day one while payment is months away. Invoice finance does not fund the transfer itself, but once the first invoice is raised the facility can release cash against it, which shortens the gap.
Will my clients mind dealing with a finance provider?
Large corporate and public-sector clients are used to paying assigned invoices and rarely object. If you would prefer clients not to be involved, confidential invoice discounting keeps the arrangement private, though providers usually reserve it for businesses with sound credit control.
Next steps
Add up your monthly in-arrears invoicing, note the payment terms of your three largest clients, and list any contracts billed in advance or with heavy set-off clauses. Read what happens if a customer does not pay so you understand recourse before you sign, and test the cost against your margins in the factoring calculator.