Invoice discounting on your terms.
Draw funding against your whole sales ledger while your team keeps chasing and collecting as normal. Compare invoice discounting from a panel of UK lenders in one place.
No obligation. Your customers won’t be contacted as part of the comparison process. Facilities from £25,001.
- Total outstanding invoices
- £250,000
- Less ineligible debts
- −£30,000
- Eligible ledger
- £220,000
- Available at 85%
- £187,000
- Drawn today
- £120,000
What is invoice discounting?
Invoice discounting is a revolving facility that lends against your outstanding invoices. You draw cash as you need it, keep collecting from customers yourself, and repay the lender as those customers pay.
Rather than sending each invoice for funding, you report your sales ledger to the lender, usually through an accounting integration or regular upload. The lender works out how much of the ledger is eligible and makes an agreed percentage available to draw.
Your customers keep paying you, normally into a bank account the lender controls. Your own team keeps sending invoices, chasing late payers and managing the relationship. That is the main difference from invoice factoring, where the lender takes over collections.
Because the lender relies on your credit control, discounting generally suits established businesses with clean ledgers and solid processes. Many discounting facilities can also be run confidentially, so customers are not told.
How invoice discounting works
Discounting runs as a rolling cycle linked to your sales ledger.
- 1
You report your ledger
Your sales ledger is shared with the lender, often daily or weekly through an accounting integration.
- 2
Availability is calculated
The lender removes ineligible debts, such as very old invoices, and applies the agreed advance rate.
- 3
You draw what you need
You request funds up to your available limit and pay interest only on what you draw.
- 4
Customers pay, the balance clears
Customer payments reduce what you owe and new invoices top up availability.
Who invoice discounting suits
Discounting is aimed at businesses that already run tight credit control and want working capital without changing how customers are managed.
Usually a good fit
- You have an in-house finance or credit control function
- Your turnover and trading history are established
- Your debtor ledger is spread across many creditworthy customers
- You want flexible drawdowns rather than funding invoice by invoice
- You use a mainstream accounting system that exports clean ledger data
Worth checking first
- You are very new or have limited filed accounts
- Credit control is patchy or aged debt is building up
- Your ledger includes disputes, contra accounts or unbilled work
- You would prefer the lender to chase customers for you (see factoring)
- Most of your sales go to a handful of customers
What affects discounting costs
Discounting is usually cheaper than factoring because the lender is not running your collections, but facilities are structured differently.
Service or management fee
Often a fixed monthly amount or a small percentage of turnover, covering the lender’s monitoring and reporting.
Discount charge
Interest on funds drawn, typically set as a margin over the Bank of England base rate.
Audits and reporting
Lenders carry out periodic ledger audits. Ask how often, and whether they are charged separately.
Security and terms
Lenders usually take a debenture and may ask for director warranties or guarantees. Check minimum terms and notice periods.
Invoice discounting compared
The main difference between the options is who collects payment and whether your customers know.
| Invoice factoring | Invoice discounting | Confidential invoice finance | |
|---|---|---|---|
| Who collects payment | The lender | You | You |
| Customers are told | Yes | Usually, though some facilities are confidential | No |
| Credit control | Run by the lender | Run by you | Run by you |
| Typical fit | Smaller or fast-growing businesses without a credit control team | Established businesses with reliable credit control | Businesses that want customer relationships untouched |
| Lender checks | Lender sees every payment | Regular ledger reporting and audits | Stricter reporting, audits and eligibility |
Available products and terms depend on your business, sector, turnover, debtor ledger and lender criteria.
See which discounting lenders fit your ledger
Discounting eligibility depends heavily on your ledger quality. Factor Now reads your aged debtor report and checks it against participating lenders’ criteria so you can see likely matches before you apply.
- 1Tell us about your businessWe verify available Companies House information automatically.
- 2Upload your aged debtor reportIt shows who owes you, how much and for how long.
- 3See matching lenders instantlyYour ledger is checked against participating lenders' criteria.
- 4Compare indicative funding and pricingNo waiting for quotes or callbacks.
- 5Progress with the lender you chooseContinue through to formal offer on Factor Now.
| Customer | Current | 1–60 | 61–90 | 91+ |
|---|---|---|---|---|
| Northgate Engineering Ltd | £26,064 | £66,557 | £6,093 | £1,693 |
| Brightway Supplies Ltd | £20,800 | £49,965 | £5,643 | £1,171 |
| Meadowbrook Foods Ltd | £31,129 | £72,750 | £9,771 | £3,729 |
| Total | £77,993 | £189,272 | £21,507 | £6,593 |
Export it from Xero, QuickBooks, Sage, FreeAgent or most other accounting systems. Older and concentrated debts affect how much of a ledger lenders will fund.
Invoice discounting questions
What is the difference between invoice discounting and factoring?
With invoice discounting you collect payments from customers yourself. With factoring the lender runs your sales ledger and collects on your behalf. Discounting usually needs stronger internal credit control.
Is invoice discounting confidential?
It can be. Many discounting facilities are confidential, so customers are not told. Some are disclosed, where invoices carry a notice that the debt has been assigned. See confidential invoice finance.
How much funding can I get?
Lenders usually advance up to around 85 to 90% of the eligible ledger. Ineligible items, such as invoices well past due or concentrated debts, are excluded. Facilities through Factor Now start from £25,001.
What turnover do I need for invoice discounting?
There is no single rule. Each lender sets its own minimums for turnover, trading history and ledger quality, which is why comparing a panel of lenders helps.
How does the lender get repaid?
Customer payments go into an account controlled by the lender. Each payment reduces your balance, and new invoices increase what you can draw.
Can I use invoice discounting with Xero or QuickBooks?
Yes, many lenders connect to mainstream accounting systems. To compare on Factor Now you only need an aged debtor report, which Xero, QuickBooks, Sage and FreeAgent can all export.
Does Factor Now provide the facility?
No. Factor Now is a technology platform and not a lender. The lender you choose carries out its own checks and provides the facility.