Guide
How to switch business bank account
What the Current Account Switch Service covers, how long it takes and what to prepare.
Read guideCompare invoice finance
Release cash tied up in unpaid invoices — factoring and discounting compared for UK businesses
Compare invoice financeReady to compare invoice finance?
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What is invoice finance?
Invoice finance lets a business borrow against the value of unpaid customer invoices, releasing typically 80-90% of the invoice value within a day or two rather than waiting the usual 30, 60 or 90 days for customers to pay.
It's particularly common in industries with long payment terms, such as manufacturing, recruitment and wholesale, where cash flow gaps between delivering work and getting paid can otherwise strain the business.
The two main forms are invoice factoring, where the lender also manages credit control and collects payment from your customers, and invoice discounting, where you retain control of collections and it stays confidential.
You raise an invoice as normal, then submit it to the finance provider, who advances an agreed percentage of its value, often within 24-48 hours.
Once your customer pays the invoice in full, the remaining balance is released to you minus the provider's fee, which is usually a combination of a service fee and a discount rate charged on the advanced amount.
What are the risks with invoice finance?
- If a customer doesn't pay, standard invoice finance usually requires you to repay the advance yourself, unless you've specifically added non-recourse bad debt protection, which costs extra.
- Concentrating too much of your ledger with one or two large customers can make a provider nervous, potentially reducing the advance rate or excluding those invoices.
- As with other business finance, missed repayments or fee obligations can affect your business credit file, and eligible small businesses can raise unresolved disputes with the Financial Ombudsman Service.
Why compare invoice finance with us
You want funding without extra admin
Factoring hands over credit control, freeing up time but meaning customers will interact with the finance provider directly.
You want to keep it discreet
Invoice discounting keeps your existing customer relationships and collections process entirely in-house.
You only need occasional support
Selective or spot factoring avoids locking your whole ledger into an ongoing contract.
Invoice finance options compared
The main facility types available to UK businesses invoicing on credit terms.
| Facility | Advance rate | Who chases payment | Disclosed? |
|---|---|---|---|
| Invoice factoring | 80% – 90% | The lender | Yes |
| Invoice discounting | 80% – 90% | You | No |
| Selective / spot factoring | 70% – 90% | Either | Usually |
| Supply chain finance | Up to 100% | The buyer's bank | Yes |
What does invoice finance cost?
Typical charges on a £50,000 invoice funded for 45 days.
| Cost line | Factoring | Discounting |
|---|---|---|
| Service fee | 0.5% – 3% of turnover | 0.2% – 0.8% of turnover |
| Discount (interest) | 2% – 4% over base | 1.5% – 3.5% over base |
| Cost on a £50,000 invoice | £450 – £900 | £300 – £650 |
| Cash released on day one | £40,000 – £45,000 | £40,000 – £45,000 |
Expert advice
Invoice finance is priced in two parts, and businesses routinely compare only one of them.
“Add the service fee and the discount rate together, then check the minimum term and exit notice before you sign.”
invoice finance: pros and cons
Pros
- Releases cash within a day or two instead of waiting weeks
- Funding grows automatically as your sales grow
- No need to offer property or other assets as security
- Can include optional bad debt protection
Cons
- Fees reduce overall margin on every invoice financed
- Factoring means customers interact with a third party
- Minimum contract terms can lock you in
- Relies on your customers' creditworthiness, not just your own
How to compare invoice finance providers
Look past the headline advance rate and check these five things:
- 1
Advance rate
Typically 80-90% of invoice value, but check whether it's fixed or varies by customer risk.
- 2
Service and discount fees
Service fees are usually a percentage of turnover, plus a separate discount rate similar to interest on the advanced amount — model the total annual cost, not just the headline rate.
- 3
Contract length and exit fees
Some providers lock you into a 12-month minimum term with early exit penalties, while others offer rolling monthly terms.
- 4
Whole ledger vs selective
Confirm whether you must finance every invoice you raise or can choose selectively, which affects flexibility and total cost.
- 5
Credit control approach
If choosing factoring, ask how the provider communicates with your customers, since this affects your customer relationships directly.
Compare invoice finance
See what's available for your business today. It takes just minutes.
Am I eligible for invoice finance?
Most UK providers will look at:
1. B2B trading
Invoice finance is generally only available for business-to-business invoices, not consumer sales, since it relies on commercial credit terms.
2. Minimum turnover
Many providers set a minimum annual turnover, commonly from £50,000 to £100,000, though some specialise in smaller businesses.
3. Customer creditworthiness
The provider will assess the credit quality of your customers, not just your own business, since they're ultimately relying on your customers to pay.
4. Clean invoicing history
A track record of invoices being paid in full and on broadly reliable terms, rather than frequent disputes or credit notes.
Meet a recruitment agency bridging 60-day terms
The agency places a contractor with a client on 60-day payment terms, but needs to pay the contractor weekly.
It raises a £20,000 invoice and receives £17,000 (85%) from its invoice finance provider within a day.
When the client pays in full after 58 days, the agency receives the remaining £3,000 minus fees, having used the early cash to pay the contractor on time without dipping into a loan or overdraft.
Invoice finance or a business loan?
Invoice finance is directly tied to your sales ledger, so funding scales automatically as your turnover grows, unlike a fixed loan amount that stays static regardless of how the business performs.
A business loan may work out cheaper overall if you have a specific, one-off funding need rather than an ongoing cash flow gap caused by payment terms.
Many growing businesses use invoice finance specifically to bridge the gap between paying suppliers or staff and being paid by customers, rather than as a source of long-term capital.
How to compare and apply for invoice finance
1
Tell us about your business
Share your trading history, turnover and what you need the product to do. It takes a couple of minutes.
2
We search the market
We compare providers across the UK on cost, features and eligibility so you only see options you can actually get.
3
Review your options
Fees, rates and terms side by side in plain English, with no jargon and no pressure to proceed.
4
Apply with confidence
Pick the provider that fits and complete the application online. We'll tell you exactly what documents you need.
Why choose Grow Your Business?
Wide choice of providers
We compare a broad range of UK providers so you can find the option that actually fits how your business operates.
Exclusive offers
We work hard to bring you exclusive deals, switching incentives and cashback where they're available.
Simple and fast
It takes just a few minutes to compare with us — and the deal you find could be well below what you pay today.
What types of invoice finance are there?
There are more options available than ever, so it pays to match the product to how your business actually operates.
Invoice factoring
The lender manages credit control and collects payment directly from your customers. Best if you want to outsource chasing payment, though customers will know finance is involved.
Invoice discounting
You keep control of your own credit control and collections, and the arrangement stays confidential from customers. Best for businesses with an established credit control process who want funding without customers knowing.
Selective invoice finance
Choose which specific invoices to finance rather than your whole ledger. Useful for one-off cash flow gaps rather than an ongoing funding relationship.
Spot factoring
A single-invoice version of factoring with no ongoing contract. Suits businesses that only occasionally need to accelerate a large invoice.
Providers we compare
UK banks and independent lenders funding unpaid B2B invoices.
Aldermore
Close Brothers
Shawbrook
Funding Circle
Bibby Financial
Lloyds BankComparing with us is a no-brainer
“Our customers pay on 60 days but our staff get paid monthly. Discounting closed that gap without taking on a loan.”
Rachel, Sheffield
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Read guideinvoice finance FAQs
Will my customers know I'm using invoice finance?
With factoring, yes — the provider manages collections directly. With invoice discounting, the arrangement is typically confidential and customers continue paying you as normal.
How quickly can I access funds?
Once set up, most providers advance funds against a new invoice within 24-48 hours of it being raised.
What happens if a customer doesn't pay?
Standard invoice finance is usually 'recourse', meaning you must repay the advance yourself, unless you've added non-recourse bad debt protection.
Can startups use invoice finance?
Some providers work with newer businesses, but most look for a minimum trading history and turnover, so it's more commonly used by established B2B businesses.
Is invoice finance the same as a business loan?
No, it's secured against unpaid invoices rather than being a fixed lump sum, and the amount available grows or shrinks with your sales ledger.
Written by the Grow Your Business editorial team · Updated 26 July 2026