Funding Options Explained
Invoice finance is a family of related products rather than a single facility. These pages explain each one: how it works, who it suits, what it costs and where it falls short.
One idea, several structures
Every product on this page does the same basic job: it releases cash tied up in invoices that business customers have not yet paid. What varies is who collects the money, whether customers are told, whether you commit your whole sales ledger or pick individual invoices, and who carries the loss if a customer never pays.
Those four questions, rather than product names, are the right way in. A business with a small finance team and many customers usually lands on factoring. One with established credit control and turnover above about £500,000 usually prefers confidential discounting. A business with occasional large invoices, or below the turnover a whole-ledger facility needs, looks at selective or spot products. Any of them can be recourse or non-recourse.
Published market ranges are quoted throughout: advance rates of roughly 70 to 90 per cent, service fees of roughly 0.5 to 3 per cent and discount charges of roughly 1.5 to 5 per cent over the reference rate. Your own terms depend on the provider and your circumstances. The costs guide explains each charge and the calculator lets you model them.
Ten pages, one for each product
Start with the umbrella page if the terms are new to you, or go straight to the structure you have been offered.
Debt Factoring
The accountancy term for invoice factoring: selling unpaid invoices to a provider for an advance, explained from first principles.
Explore debt factoringInvoice Factoring
Funding plus a credit control service. The provider chases and collects, which suits businesses without a finance team.
Explore invoice factoringInvoice Finance
The umbrella term. How the family of products fits together and how to tell which one a provider is actually describing.
Explore invoice financeInvoice Discounting
Borrow against the whole sales ledger while keeping your own credit control. Lower fees, higher entry requirements.
Explore invoice discountingConfidential Invoice Discounting
Discounting where customers are never told. Trust accounts, reconciliations and what providers need to see before agreeing it.
Explore confidential discountingSelective Invoice Finance
An ongoing facility where you choose which invoices or customers to fund, with no commitment to the whole ledger.
Explore selective financeSpot Factoring
A one-off transaction against a single invoice. Useful for a large order or a cash gap, usually at a higher per-invoice cost.
Explore spot factoringRecourse Factoring
The standard form: you repay or replace invoices that remain unpaid after the recourse period. Cheaper, but the risk stays with you.
Explore recourse factoringNon-Recourse Factoring
Factoring with protection against an approved customer's insolvency, so a bad debt within the credit limit does not come back to you.
Explore non-recourse factoringBad Debt Protection
Credit insurance added to a facility or bought alongside it: what it covers, what it excludes and what the premium typically costs.
Explore bad debt protectionWhich structure suits which business
A general guide to where each product tends to fit. Providers set their own criteria, and a conversation about your ledger will narrow the choice quickly.
| Business situation | Structure that often fits | Why | Watch out for |
|---|---|---|---|
| Turnover £100k to £1m, no dedicated credit controller, many customers | Invoice factoring | Provider's collections team does the chasing; eligibility rests on customer quality. | Customers are notified; service fee at the higher end of the range. |
| Turnover above roughly £500k, established credit control, good systems | Confidential invoice discounting | Lower service fee; customers see nothing; you keep the relationship. | Monthly reconciliations and audits; providers survey your processes closely. |
| Occasional large invoices, or below the minimum turnover for a whole-ledger facility | Selective invoice finance or spot factoring | Fund only what you need, when you need it; no long contract. | Higher cost per invoice; each customer underwritten separately. |
| Strong customers, low bad-debt history, cost is the priority | Recourse factoring | Cheapest form; you accept the risk of non-payment. | Unpaid invoices come back after 90 to 120 days; refactoring fees. |
| Exposure to a few large customers whose failure would hurt | Non-recourse factoring or bad debt protection | Insolvency of an approved customer is absorbed by the provider, within limits. | Disputes and slow payment are not covered; premium of roughly 0.5 to 1 per cent. |
| New business with a contract to supply creditworthy customers | Selective, then factoring as turnover grows | Underwriting focuses on the customer, not your trading history. | Lower advance rates at first; personal guarantees are usual. |
| One customer is more than 30 per cent of sales | Depends on that customer's credit strength | Concentration limits restrict whole-ledger funding; selective products can work. | See the eligibility page before enquiring. |
Unsure which column you are in?
Tell us about your turnover, sector and customers and your enquiry is passed to a provider who can say which structure is realistic.
Decide between the main alternatives
Factoring vs invoice discounting
Who collects, whether customers know, what each costs and which businesses providers steer towards each.
CompareInvoice finance vs business loans
Flexible funding against receivables or fixed borrowing and overdrafts: cost, security, scalability and control.
CompareRecourse vs non-recourse factoring
Who carries the bad debt risk, what protection actually covers and when paying for it makes sense.
CompareFind Out Whether Invoice Factoring Could Work for Your Business
Tell us about your business and funding requirements to explore your next steps.