A facility that advances most of the value of an invoice as soon as it is raised, instead of waiting 60 days for it. The lender underwrites your customers at least as closely as it underwrites you.
Advance typically up to around 85% to 90% of approved invoices · factoring or discounting · selective or whole-ledger
Typical situations
Orders are up, the work is done and invoiced, and the money arrives 60 days later. Meanwhile wages, suppliers and VAT all land on time. Growth of this kind consumes cash rather than producing it, and a term loan simply adds a fixed repayment on top. A facility that releases cash as invoices are raised moves with the trading instead of against it.
A single debtor accounting for most of the ledger is a concentration risk to a lender, and often the reason a facility is capped. Selective finance against that debtor alone is sometimes the cleaner answer.
Confidential invoice discounting leaves you collecting your own invoices and your customers unaware there is a facility behind them. It requires credit control a lender is willing to rely on.
Under factoring the lender takes over collection: it chases your customers, allocates the payments and manages the sales ledger. That suits a business without a credit control function, and it is visible to your customers. Under invoice discounting you keep collecting, and on a confidential facility your customers are not told there is a lender behind you. Discounting is usually reserved for businesses with stronger systems and a longer record.
The advance is a percentage of approved invoices, commonly around 85% to 90%, with the balance paid over when the customer settles, less the charges. Invoices that are disputed, outside terms, or owed by a debtor the lender has not approved do not count towards availability, which is why the real facility size is a function of your ledger rather than of your turnover.
Concentration limits matter more than most owners expect. A lender will usually cap how much of the facility can rest on any one debtor, often somewhere around 25% to 40% of the ledger. A business with one dominant customer can look well funded on paper and find availability far lower in practice, so that is checked before an application rather than after.
Indicative market ranges, not an offer of finance. Terms depend on the lender, the security and your circumstances.
What the lender assesses
What goes in the pack
Anything in dispute is excluded from availability and makes a lender look harder at everything else. The ledger is cleaned and the disputes explained before submission rather than during the audit.
Where one debtor dominates, whole-ledger facilities get capped. We either go to lenders comfortable with concentration or structure a selective facility against that debtor, rather than discovering the cap at offer stage.
Some customer contracts prohibit assigning the invoice, which stops a facility outright. The terms of sale go in at the start so the issue is dealt with, or waived, before anyone builds a facility on them.
An invoice a lender cannot verify is an invoice it will not fund. We check what evidence actually exists behind a typical sale before the facility is designed around it.
Under factoring, yes: the lender collects the invoices and your customers pay them directly. Under confidential invoice discounting they are not told, you continue to collect, and payments go into a trust account in your name. Confidential facilities need credit control the lender is prepared to rely on, so they are not available to everyone.
Usually two charges: a service fee as a percentage of turnover for running the facility, and a discount charge on the funds you actually draw, priced over a base rate. Comparing facilities on one of the two alone is misleading, so we set both out together with an estimate of what they cost on your ledger.
Less than with a term loan, because the security is your customers’ obligation to pay rather than your balance sheet. That is why invoice finance often works for a business that has grown quickly or has a thin filed record. Directors are still credit searched and guarantees are still usually required.
Yes. Selective and spot facilities let you choose which invoices to fund rather than committing the whole ledger. They cost more per invoice and suit occasional need: one large order, or one slow-paying customer, rather than a permanent working capital line.
On a recourse facility the advance is repayable by you, usually after a set period, and the debt comes back to your ledger. Non-recourse and bad debt protection transfer some of that risk to an insurer for an additional charge. Which one you have is worth knowing before it matters.
Where the gap is paying suppliers before goods are sold, rather than waiting on invoices already raised.
Where the need is a defined sum for a defined purpose rather than a facility that moves with the ledger.
The ledger tells us more in five minutes than turnover does. We will come back with what the facility would realistically release, and which lenders suit the debtor book.
