Invoice Finance UK 2026: Compare Costs, Providers, Factoring & Quotes

Quick summary

Invoice finance lets UK businesses release cash from unpaid customer invoices instead of waiting 30, 60 or 90 days for payment.

It is usually used by B2B businesses that invoice other businesses on credit terms.

There are three common types:

Invoice finance type	How it works	Best for
Invoice factoring	Provider advances money against invoices and usually helps collect payment	SMEs wanting funding and credit control support
Invoice discounting	Provider advances money, but your business usually keeps control of collections	Established businesses with in-house credit control
Selective invoice finance	You choose specific invoices to finance	Businesses wanting flexible, occasional funding
Spot factoring	One invoice or a small batch of invoices is funded	One-off cash flow gaps
Asset-based lending	Wider facility secured against invoices and other assets	Larger businesses with stock, debtors or assets

Invoice finance providers may release up to around 80%-90% of an invoice value upfront, with the remaining balance paid after your customer settles the invoice, minus fees, so your costs will usually include:

service fee
discount charge
setup fee
facility fee
minimum monthly fee
bad debt protection cost
termination fee
credit check or admin fees
CHAPS or same-day payment fees

Invoice finance can be useful if your business has strong customers but slow payment terms, but is less suitable if you mainly sell to consumers, have poor-quality invoices, have frequent disputes, or rely on very small invoice values.

Compare Invoice Finance Quotes

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Compare invoice finance providers in the UK

Use this guide if you are comparing:

invoice finance UK
invoice factoring UK
invoice discounting UK
selective invoice finance
spot factoring
invoice finance providers
invoice finance costs
invoice finance fees
invoice finance for small businesses
invoice finance for startups
construction invoice finance
recruitment invoice finance
manufacturing invoice finance
haulage invoice finance
cash flow finance
B2B invoice funding
unpaid invoice finance
bad debt protection
debtor finance
asset-based lending

Key Takeaways

Invoice finance helps businesses access cash tied up in unpaid invoices.
It is usually best suited to B2B businesses that invoice customers on credit terms.
Invoice factoring usually includes provider-led credit control.
Invoice discounting usually lets your business keep control of collections.
Selective invoice finance lets you fund specific invoices instead of the whole sales ledger.
Providers may advance up to around 80%-90% of an invoice value upfront, depending on the agreement.
Costs usually include a service fee and a discount charge.
Approval often depends on the quality of your invoices and the credit strength of your customers.
Invoice finance can improve cash flow, but fees reduce margin.
The cheapest provider is not always the best if service, speed, contract terms or customer handling are poor.
Compare total cost, funding percentage, contract length, customer visibility and exit terms.

How do we work?

Transparent, impartial, and data‑driven reviews made by a team of expert humans, never AI generated – here’s exactly how Compare Your Business Costs helps you find the best deals from trusted UK providers: click here

Authored by: Ally Cox (Business Technology & B2B Services Specialist 10+ Years’ Experience)

Reviewed by: James Ward (Telecoms Specialist, 12+ Years Experience)

Last Updated: August 2026

Contents:

What is Invoice Finance	Cost of Invoice Finance
How invoice finance works	Should You Use Invoice Finance
Invoice factoring vs invoice discounting	Invoice Finance Providers

What is Invoice Finance

Invoice finance is a type of business funding that allows a company to borrow against unpaid customer invoices, so instead of waiting for customers to pay, your business can receive part of the invoice value earlier.

For example:

You complete work or supply goods.
You raise an invoice to your customer.
The invoice finance provider advances a percentage of the invoice value.
Your customer pays the invoice later.
The provider releases the remaining balance after deducting fees.

Invoice finance is also known as:

invoice factoring
invoice discounting
debtor finance
receivables finance
accounts receivable finance
invoice funding
sales ledger finance

It is most common in B2B industries where customers pay on 30, 60 or 90-day terms.

How invoice finance works

Here is a simple example.

Invoice value: £10,000
Advance rate: 85%
Initial payment to your business: £8,500
Customer pays invoice: £10,000
Provider deducts fees: example only
Remaining balance released: invoice balance minus charges

The exact amount you receive depends on:

invoice value
advance rate
service fee
discount charge
customer payment time
invoice quality
customer creditworthiness
whether bad debt protection is included
contract terms

The longer the customer takes to pay, the more discount charges may apply.

Disadvantages of Invoice Finance

Costs include discount rates and service fees, which reduce profits.
If customers are slow to pay, you may receive only part of the invoice upfront.
Selling invoices may affect customer relationships, as a third party manages collections.

Invoice factoring vs invoice discounting

Feature	Invoice factoring	Invoice discounting
Who chases payment?	Usually provider	Usually your business
Customer knows provider is involved?	Usually yes	Often confidential, depending on agreement
Best for	SMEs needing credit control support	Established businesses with credit control
Control over customer relationship	Lower	Higher
Admin support	Higher	Lower
Suitability	Businesses wanting funding and collections support	Businesses wanting funding but keeping customer contact
Typical perception	More visible	More discreet
Setup complexity	Varies	Often requires stronger systems

Selective invoice finance vs full facility

Option	How it works	Best for
Selective invoice finance	Choose which invoices to fund	Occasional cash flow gaps
Spot factoring	Fund one invoice or a small batch	One-off funding need
Full invoice finance facility	Finance most or all eligible invoices	Ongoing cash flow support
Confidential invoice discounting	Funding without customers usually knowing	Established businesses wanting discretion
Invoice finance with bad debt protection	Funding plus protection if customers cannot pay	Businesses worried about customer default

How much does invoice finance cost?

Invoice finance costs vary by provider, turnover, invoice value, sector, customer quality and payment terms.

Typical charges can include:

Cost type	What it means
Service fee	Fee for managing the facility, often based on turnover or invoice value
Discount charge	Interest-like charge based on the amount advanced and time outstanding
Setup fee	One-off facility setup cost
Facility fee	Ongoing fee for keeping the funding line available
Minimum monthly fee	Minimum charge even if you use less funding
Bad debt protection fee	Additional cost if you want protection against customer non-payment
CHAPS or same-day payment fee	Charge for faster transfer
Credit check fee	Charge linked to customer checks
Termination fee	Cost to leave before contract end
Audit or review fee	May apply for larger facilities
Refactoring fee	Possible charge if invoices remain unpaid too long

Invoice finance cost example

Here is a simplified example.

Example item	Amount
Invoice value	£20,000
Advance rate	85%
Upfront cash released	£17,000
Remaining balance	£3,000
Customer payment term	60 days
Fees	Provider-specific
Final amount received	Remaining balance minus fees

Should You Use Invoice Finance

Invoice finance will suit businesses that:

sell to other businesses
raise invoices on credit terms
wait 30-90 days for payment
have reliable customers
need working capital
want to fund growth
need to pay suppliers before customers pay
have seasonal cash flow gaps
are growing faster than cash flow allows
have large orders to fulfil
want an alternative to loans or overdrafts
have a strong debtor book
need flexible funding linked to sales

Common sectors include:

recruitment
construction
manufacturing
wholesale
transport and haulage
logistics
printing
facilities management
professional services
security
cleaning
engineering
import/export
B2B services

What affects invoice finance fees?

Invoice finance pricing usually depends on:

annual turnover
monthly invoice value
number of invoices
average invoice size
customer creditworthiness
debtor spread
payment terms
invoice dispute history
sector risk
bad debt history
whether customers are UK or overseas
whether invoices are verified
whether you want factoring or discounting
whether you want selective or full-facility finance
whether bad debt protection is included
contract length
minimum facility size
personal guarantee requirements
business trading history
accounting software and admin quality

Businesses with reliable customers, clean invoices and regular turnover usually have more options.

Who may not be suitable for invoice finance?

Invoice finance probably will not be suitable if your business:

sells mainly to consumers
takes payment upfront
has very low invoice values
has heavily disputed invoices
has customers with poor credit
has short payment terms already
does not issue invoices
has weak sales ledger records
has lots of one-off consumer sales
has contracts that prevent invoice assignment
has already pledged invoices elsewhere
cannot afford the fees
wants funding unrelated to sales
needs long-term capital investment rather than working capital

If you do not invoice other businesses, a business loan, overdraft, merchant cash advance or asset finance may be more appropriate.

Invoice finance providers to compare

This is not a fixed ranking. The right provider depends on your sector, turnover, invoice quality, customer base and whether you need factoring, discounting or selective finance.

Provider	Why businesses compare it	What to check
Bibby Financial Services	Specialist invoice finance and business funding provider	Advance rate, fees, contract terms and sector fit
Aldermore	Invoice finance, factoring, discounting and asset-based lending options	Minimum requirements, fees and customer management
Close Brothers Invoice Finance	Specialist invoice finance and asset-based lending provider	Turnover requirements, fees and facility structure
Lloyds Bank Invoice Finance	Bank-backed invoice finance and receivables funding	Eligibility, costs and customer control
HSBC Invoice Finance	Receivables finance and international business support	Fees, facility type and customer visibility
RBS / NatWest invoice finance	Bank-backed invoice finance and FacFlow-style online management	Eligibility, support and regional fit
Time Finance	Invoice finance and asset finance options	Product fit, pricing and customer reviews
Novuna Business Finance	Invoice finance and business finance solutions	Eligibility, support and contract terms
Metro Bank SME Finance	Invoice finance and business funding options	Availability, facility size and costs
Fund Onion	Business finance comparison route	Whether it compares suitable invoice finance options for your needs
Specialist brokers	Can compare several funders	Broker fees, commission, lender panel and advice level

Best invoice finance option by business type

Business type	Option to compare first	Why
Recruitment agency	Invoice factoring or discounting	Payroll may be due before clients pay
Construction business	Specialist invoice finance	Applications, staged payments and disputes need care
Manufacturer	Invoice discounting or ABL	Stock, orders and working capital needs
Wholesaler	Invoice finance or asset-based lending	Cash tied up in stock and customer terms
Transport or haulage	Factoring or discounting	Fuel, wages and supplier costs due before customer payment
Cleaning company	Factoring	Ongoing contracts and payroll pressure
Security company	Factoring or discounting	Regular staffing costs and monthly invoicing
Professional services	Selective invoice finance	Occasional large invoices or slow-paying clients
Export business	Invoice finance with trade support	Overseas debtor risk and currency/payment terms
Startup B2B business	Selective invoice finance or factoring	Depends on customer quality and trading history
Larger SME	Invoice discounting	Keeps credit control in-house

Invoice finance vs business loan

Feature	Invoice finance	Business loan
Funding based on	Unpaid invoices	Business profile and affordability
Repayment source	Customer invoice payment	Business repayments
Best for	Cash tied up in invoices	Wider business investment
Flexibility	Grows with eligible invoice value	Fixed loan amount
Customer visibility	Depends on factoring/discounting	Usually not customer-facing
Cost style	Service fee and discount charge	Interest and fees
Suitability	B2B invoicing businesses	Wider range of businesses

Invoice finance vs overdraft

Feature	Invoice finance	Business overdraft
Funding limit	Linked to invoices	Agreed bank limit
Availability	Depends on invoices and customers	Depends on bank approval
Flexibility	Can grow with sales	Limit may be fixed
Cost	Facility/service/discount fees	Interest and overdraft fees
Best for	Late customer payments	Short-term cash buffer
Security	Often linked to debtor book	May require security or guarantee

Invoice finance vs merchant cash advance

Feature	Invoice finance	Merchant cash advance
Best for	B2B invoicing businesses	Card-taking businesses
Repayment source	Customer invoices	Percentage of card sales
Suitable for	Recruitment, construction, manufacturing, wholesale	Retail, hospitality, salons, ecommerce
Cost style	Service and discount charges	Fixed fee or factor rate
Customer involvement	Possible	No customer invoice involvement

How to compare invoice finance quotes

When comparing invoice finance providers, ask:

what advance rate is available?
what is the service fee?
what is the discount charge?
are there setup fees?
are there minimum monthly fees?
is bad debt protection included?
what happens if a customer pays late?
what happens if an invoice is disputed?
who handles credit control?
will customers know I am using invoice finance?
is the facility confidential?
can I choose which invoices to finance?
is there a minimum contract term?
are there exit fees?
are personal guarantees required?
what turnover is required?
what invoice value is required?
are overseas customers eligible?
are construction applications eligible?
does it integrate with my accounting software?
how quickly can funds be released?
how much admin is involved?
who owns the customer relationship?

Hidden invoice finance costs to check

Before signing, check for:

arrangement fees
service fees
discount charges
minimum monthly fees
audit fees
review fees
same-day payment fees
CHAPS fees
credit check fees
refactoring fees
bad debt protection fees
termination fees
notice periods
personal guarantee requirements
concentration limits
debtor limits
funding caps
non-recourse restrictions
overdue invoice charges
disputed invoice treatment

Ask for a full cost example using your actual invoice values and payment terms.

Invoice finance eligibility checklist

You are more likely to qualify if:

you sell to other businesses
you raise invoices after delivering goods or services
your customers pay on credit terms
your customers are creditworthy
you have clean invoice records
your invoices are not heavily disputed
you can show trading history
your turnover meets provider requirements
your payment terms are clear
your contracts allow invoice assignment
you have not already pledged the invoices elsewhere
your accounting records are up to date

You could still be able to qualify as a startup if you have strong customers and eligible invoices, but options may be more limited.

Pros and cons of invoice finance

Pros	Cons
Can improve cash flow quickly	Fees reduce profit margin
Funding grows with sales	Not suitable for all business types
Uses unpaid invoices as the funding basis	Customer creditworthiness matters
Can help fund wages, suppliers and growth	Customer relationship may be affected with factoring
May be easier than some loans for B2B firms	Contracts can include minimum fees or exit terms
Can reduce time chasing customers if factoring	Invoices may be rejected if disputed or high risk
May support fast-growing businesses	Can be more expensive than other funding in some cases

Common invoice finance mistakes to avoid

Avoid these mistakes:

choosing a provider only by advance rate
ignoring service fees
ignoring discount charges
ignoring minimum monthly fees
not checking exit fees
not checking whether customers will be contacted
choosing factoring when you need confidentiality
choosing discounting without strong credit control
not checking disputed invoice rules
not checking customer concentration limits
not checking bad debt protection terms
assuming all invoices are eligible
not comparing customer handling
using invoice finance for weak-margin work
signing a long contract without understanding notice periods
failing to compare with overdrafts, loans or other working capital options

When invoice finance is worth comparing

Invoice finance is worth comparing if:

customers take 30-90 days to pay
late payments create cash flow pressure
you need to pay wages before invoices are paid
you need to pay suppliers before customers pay
you are turning down work due to cash flow
you are growing quickly
you have large unpaid B2B invoices
you have reliable customers but slow payment terms
your overdraft is not enough
you want funding linked to sales
you want support with credit control
you want to reduce reliance on loans

Compare Invoice Finance Quotes

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Final verdict

Invoice finance can be a useful way for UK businesses to unlock cash tied up in unpaid invoices, and is usually best for B2B businesses with reliable customers, clear invoice records and payment terms of 30, 60 or 90 days.

Invoice factoring could best suit businesses that want funding and credit-control support, whereas invoice discounting may suit established businesses that want to keep control of customer collections.

Selective invoice finance could also suit businesses that only need occasional funding for specific invoices.

The best approach is to compare providers based on:

invoice value
turnover
customer quality
advance rate
service fee
discount charge
setup fees
contract length
customer visibility
credit control
bad debt protection
funding speed
accounting software integration
total cost

Compare Invoice Finance Providers

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FAQs: invoice finance UK

What is invoice finance?

Invoice finance is a type of business funding that allows companies to access cash tied up in unpaid customer invoices.

How does invoice finance work?

Your business raises an invoice, the finance provider advances part of the invoice value, your customer later pays the invoice, and the remaining balance is released after fees are deducted.

What is invoice factoring?

Invoice factoring is a type of invoice finance where the provider advances money against invoices and usually manages credit control or customer payment collection.

What is invoice discounting?

Invoice discounting is a type of invoice finance where the provider advances money against invoices, but your business usually keeps control of customer payments and credit control.

What is selective invoice finance?

Selective invoice finance lets you choose specific invoices to finance rather than funding your whole sales ledger.

What is spot factoring?

Spot factoring usually means financing one invoice or a small batch of invoices for a one-off cash flow need.

How much of an invoice can I receive upfront?

Providers may advance up to around 80%-90% of an eligible invoice value upfront, depending on the provider, customer, invoice and facility.

How much does invoice finance cost?

Costs vary, but invoice finance usually includes a service fee and a discount charge. Some providers may also charge setup, facility, bad debt protection, audit, CHAPS or termination fees.

Is invoice finance expensive?

It can be more expensive than some traditional funding, but it may be useful if late payments are restricting cash flow or growth. Compare total cost before signing.

Who is eligible for invoice finance?

Invoice finance is usually for B2B businesses that raise invoices to other businesses on credit terms. Eligibility depends on invoice quality, customer creditworthiness, turnover and provider criteria.

Can startups use invoice finance?

Some startups can use invoice finance if they have eligible B2B invoices and creditworthy customers, but options may be more limited than for established businesses.

Does invoice finance require a good credit score?

Your business credit profile matters, but providers also look closely at your customers’ creditworthiness and the quality of your invoices.

Will my customers know I use invoice finance?

With invoice factoring, customers usually know because the provider may manage collections. With confidential invoice discounting, customers may not know, depending on the facility.

What happens if my customer does not pay?

It depends on whether the facility is recourse or non-recourse and whether bad debt protection is included. Check the agreement carefully.

What is bad debt protection?

Bad debt protection can protect your business if a customer cannot pay because of insolvency or agreed default events, subject to policy terms and limits.

Can I finance only one invoice?

Yes, some providers offer selective invoice finance or spot factoring for individual invoices, although fees may be higher than a full facility.

Is invoice finance regulated?

Invoice finance is a commercial finance product. Providers may operate under different regulatory or industry frameworks depending on product and firm structure, so check the provider’s status and membership before signing.

Is invoice finance better than a loan?

Invoice finance may be better for cash flow tied up in unpaid invoices. A loan may be better for wider investment, equipment, refurbishment or costs not linked to invoices.

How quickly can I get invoice finance?

Setting up a facility can take time, but once approved and operational, invoice finance can often release funds quickly after invoices are raised or submitted.

How do I compare invoice finance providers?

Compare advance rate, service fee, discount charge, setup fees, minimum fees, funding speed, contract length, customer handling, bad debt protection, eligibility and total cost.

James Ward( CEO & Founder )

James Ward is the CEO & Founder of Compare Your Business Costs — a UK-verified comparison platform helping SMEs save money on business broadband, leased lines, phone systems, mobile telecoms, managed services and IT support. With over 10 years of experience in telecoms and technology procurement, James is a trusted UK business expert featured in national media and verified on Companies House.

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