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Invoice finance is a form of working capital facility where the lender advances a percentage of the value of your outstanding invoices, typically 70% to 90% of the invoice face value, immediately upon issue. When your customer pays, the lender releases the remaining balance minus their fee.
Invoice finance is particularly valuable for businesses that trade on credit terms with other businesses (B2B), have a growing order book, and find that slow-paying customers create recurring cash-flow pressure. It grows in line with your turnover, so as your business scales the facility scales with it.
| Feature | Invoice Discounting | Factoring |
|---|---|---|
| Credit control | Retained by your business | Handled by the lender |
| Customer awareness | Confidential | Customers know a funder is involved |
| Admin burden | Low (you manage collections) | Lower (lender chases payment) |
| Best suited to | Established businesses with experienced credit control | Growing businesses or those lacking credit control resource |
| Advance rate | 70% to 90% of invoice value | 70% to 90% of invoice value |
| Bad debt protection | Optional add-on | Often included |
We identify the most suitable lender for your business size, sector, and customer profile and manage the facility setup, which usually takes one to two weeks.
You raise an invoice as normal and upload it to the lender's online platform. The advance is typically transferred to your account within 24 hours.
Your customer pays into a designated trust account or directly to the lender (depending on the product). The lender deducts their fee and releases the remaining balance to you.
The facility is revolving and grows with your debtor book. We review your facility annually and at any point your business needs change to ensure it remains competitively priced.
Rapid growth often creates a cash-flow paradox: more orders require more working capital, but income arrives weeks after costs are incurred. Invoice finance resolves this by converting your debtor book into available cash in real time. The facility grows in line with revenue so there is no need to renegotiate every few months.
Long payment terms from large customers, particularly national retailers and public sector bodies, are a common trigger for invoice finance enquiries. An invoice discounting facility allows you to draw against those invoices immediately while maintaining a confidential relationship with your customer.
Winning a large contract is only valuable if you can deliver it. Invoice finance against milestone or completion invoices can bridge the funding gap between starting work and receiving payment. We identify lenders who understand contract finance and project-based billing structures.
Even businesses with cash-flow problems can access invoice finance where the underlying debtor book is strong. Lenders assess the quality of your customers as much as your own trading history, and a solid customer base can support a facility even where your own credit profile is less than perfect.
Speak to an adviser to discuss your circumstances and find out how we can help.
Clear,honest answers to the questions we hear most from clients and introducers.
Costs vary by lender and facility structure but typically involve a service charge of 0.5% to 2% of turnover per annum and a discount charge (interest) on funds drawn, usually at base rate plus 2% to 4%. Factoring is generally more expensive than invoice discounting due to the credit control service included. We compare total cost of facility across lenders rather than headline rates.
With invoice discounting, the facility is fully confidential and your customers receive your own invoice and pay directly to you or to a trust account in your name. With factoring, your customers are notified and pay the lender directly. We discuss confidentiality requirements upfront to ensure the right product is selected.
Yes. Invoice finance facilities are typically granted in addition to, not instead of, overdrafts and term loans. However, some lenders will require debenture security over your book debts, which may affect other lenders’ security positions. We review your existing facilities before recommending a product.
Under standard invoice discounting, your business remains liable if a customer fails to pay. Bad debt protection (a form of credit insurance) can be added to the facility to protect against customer insolvency. Factoring often includes bad debt protection as standard. We advise on the level of protection appropriate to your customer base.
Talk to a Square Gain Capital adviser today to find out how invoice finance can transform your business cash flow.
Share a few details and a member of our team will get in touch to discuss your options.
We’ll get in touch to discuss your circumstances, what you’re looking to achieve and any relevant requirements.
Based on your enquiry, we’ll explain the available options and how you can move forward.
Your enquiry will be handled confidentially, and we’ll only contact you regarding the information you’ve provided.
