Invoice Finance for UK Businesses

What Is Invoice Finance?

Invoice finance is a funding arrangement that allows a business to access a proportion of the value of its outstanding sales invoices immediately, rather than waiting for customers to pay at the end of their credit terms. The finance provider advances typically 70–90% of eligible invoice values, with the remainder (minus fees) settled once the customer pays.

For B2B businesses operating on 30–90 day payment terms, invoice finance can significantly improve cashflow by converting unpaid invoices into working capital — without taking on traditional debt against fixed assets.

Types of Invoice Finance

Invoice Factoring

The business sells its invoices to the finance provider, which advances the majority of the value immediately and manages the credit control process — including chasing customers for payment. Customers are aware that a third-party factor is managing collections. Well-suited to smaller businesses or those that want to outsource their credit control function.

Invoice Discounting

The business retains its own credit control and customer relationships. The finance provider advances funds against the debtor book, but the arrangement is typically confidential — customers pay the business directly as normal. Generally requires more established businesses with robust internal credit control processes.

Selective Invoice Finance

Rather than funding the whole debtor book, the business can choose specific invoices to finance on an ad hoc basis. This provides flexibility for businesses that only need occasional cashflow support, rather than a whole-turnover facility.

How Much Can Be Advanced?

• ✓ Advance rate: typically 70–90% of eligible invoice values
• ✓ Facility size: grows as the debtor book grows — scalable with the business
• ✓ The remaining balance (minus fees) is paid once the customer settles
• ✓ Minimum turnover thresholds apply and vary by lender

Who Is It Suitable For?

• ✓ B2B businesses that invoice other businesses on credit terms
• ✓ Businesses with 30–90 day payment terms waiting on significant debtor balances
• ✓ Growing businesses where revenue growth is creating cashflow gaps
• ✓ Businesses with a diversified customer base (reduced concentration risk)
• ✓ Businesses where traditional borrowing is limited or insufficient

Advantages and Considerations

Example Use Cases

Recruitment and Staffing Business

A staffing agency placing contractors pays weekly wages but invoices clients monthly on 30-day terms. Invoice finance provides the cash to fund wages immediately, with the facility replenishing as invoices are paid.

Wholesale or Distribution Business

A wholesale distributor supplying retailers on 60-day terms can use invoice discounting to convert outstanding invoices into immediate working capital — funding stock purchases and supplier payments without waiting for customers to pay.

Professional Services

A consultancy or professional services firm with significant outstanding project invoices can use selective invoice finance to draw against specific large invoices while managing overall cashflow.

Manufacturing Business

A manufacturer delivering goods to trade customers on 90-day terms can use invoice finance to reduce the working capital cycle — funding raw material purchases and production without tying up capital in the debtor book for three months.

Frequently Asked Questions

Will my customers know I'm using invoice finance?

With invoice factoring, customers are typically aware of the arrangement — payments are made to the factor's account. With confidential invoice discounting, the arrangement is not disclosed to customers, who continue to pay the business directly. The right choice depends on customer relationships and the business's credit control capability.

What happens if a customer doesn't pay?

This depends on whether the facility is recourse or non-recourse. With a recourse facility, if a customer fails to pay, the advance must be repaid. Non-recourse facilities (sometimes called bad debt protection) provide cover if a customer becomes insolvent. Terms vary by lender and product.

Is there a minimum business size for invoice finance?

Most whole-turnover invoice finance providers have minimum annual turnover requirements — commonly £100,000 or more. Selective invoice finance products may have lower thresholds. Requirements vary by lender.

Can invoice finance be used alongside other business funding?

Yes — invoice finance is often used alongside other facilities such as asset finance or term loans. The nature of the security (the debtor book) is generally separate from property or asset-based security.

How quickly can an invoice finance facility be set up?

Setup timescales vary by lender and complexity of the debtor book. Some facilities can be arranged and operational within a few weeks. Larger or more complex arrangements may take longer. NexGen Finance does not guarantee any specific timescale.