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Invoice finance lets a UK SME borrow against its unpaid sales invoices — releasing typically up to 90% of the invoice value within 24–48 hours of raising the invoice, instead of waiting 30, 60 or 90 days for the customer to pay. Two flavours: invoice discounting (you keep credit control) and factoring (the lender chases payment).
A non-exhaustive snapshot of the most common invoice finance use cases we see across UK SMEs in our broker panel.
Smooth out 60/90-day customer payment cycles without an overdraft.
A facility that scales linearly with sales — the more you invoice, the more cash is available.
Cheaper than a typical SME overdraft once turnover passes ~£500k/yr.
Funding the working-capital line of an acquired business on day one.
Factoring lifts the chase-the-invoice burden off your finance team.
Bespoke variants exist for construction (CIS) and recruitment (timesheet finance).
There are dozens of UK business-funding products. Here’s when invoice finance is the right one — and what to consider instead if not.
Unlike a fixed-limit loan or overdraft, the facility grows automatically as you invoice more.
Lenders advance against the invoice itself — underwriting focuses on the customer’s credit, not yours.
Usually significantly cheaper than a merchant cash advance or short-term unsecured loan.
With confidential invoice discounting (CID) your customers never know a lender is involved.
Closely-related UK SME funding products to consider alongside — or instead of — invoice finance.
Plain-English answers to the questions UK SME owners ask us most often about invoice finance.
You raise an invoice to your customer as normal. You upload it to your invoice-finance lender, who advances 80–90% of the value (less fees) within 24–48 hours. When your customer pays the invoice, the lender releases the remaining 10–20% (less the service and discount fees).
Invoice discounting (CID) is confidential — you keep credit control and your customers don’t know a lender is involved. Factoring is disclosed — the lender takes over credit control and chases payment from your customers directly. Factoring tends to suit smaller SMEs; CID suits larger ones with their own credit-control function.
A new facility takes 1–3 weeks to set up. Once live, drawdowns happen within 24–48 hours of invoice upload — often same day with a fully digital lender.
Two fees: a service fee (0.5–3% of turnover, depending on volume and complexity) plus a discount fee (1.5–5% over the Bank of England base rate, applied to the funds drawn). All-in cost is typically equivalent to 2.5–7% APR, far cheaper than an MCA.
Yes — lenders care more about who you invoice than your trading history. A 6-month-old Ltd company invoicing blue-chip customers on 30-day terms is a classic invoice-finance fit. Solo sole traders or B2C-only businesses are not.
Without bad-debt protection, you have to repay the advance to the lender (a process called “recourse”). With bad-debt protection (BDP) added, the lender absorbs the loss up to an agreed limit per customer. BDP typically adds 0.2–0.5% to the service fee.
Confidential invoice discounting (CID) for limited companies is not FCA-regulated — it is governed by the UK Finance Standards Framework. Factoring with disclosure to consumer-rated debtors can fall under FCA consumer-credit rules. Most reputable UK invoice-finance providers are voluntary signatories to the UK Finance code.
Every page below feeds the same panel of British Business Bank-accredited GGS lenders. Pick the deep-dive that matches your question, or jump to grants and alternative funding routes.
Important information: The Business Hub is a credit broker, not a lender. We introduce UK businesses to a panel of lenders and finance providers. Business finance products for limited companies (including unsecured loans, merchant cash advances and Growth Guarantee Scheme facilities) are generally not regulated by the Financial Conduct Authority. Any rates or quotes shown are indicative, for information purposes only, and subject to status, lender criteria and separate terms & conditions. Personal Guarantees and Indemnities may be required — under the Growth Guarantee Scheme the borrower always remains 100% liable for the debt. We may receive a commission from lenders, which can vary depending on the lender, product or other permissible factors; the nature of any commission model will be confirmed before you proceed.
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