Invoice factoring compared in one place.
Release cash tied up in unpaid invoices and let the lender handle credit control. Compare factoring options from a panel of UK lenders and see indicative funding and pricing straight away.
No obligation. Your customers won’t be contacted as part of the comparison process. Facilities from £25,001.
- Invoice value
- £20,000
- Advance at 85%
- £17,000
- Paid to you
- Once the invoice is approved
- Customer pays the lender
- Day 45
- Balance released, less fees
- £3,000 minus fees
What is invoice factoring?
Invoice factoring is a way of funding a business against its unpaid invoices. A lender advances most of each invoice’s value upfront, collects payment from your customer, then pays you the balance minus its fees.
The lender, often called a factor, takes over your sales ledger. It chases payment, sends statements and allocates cash as your customers pay. Because customers pay the factor directly, they will know you use the facility.
That collection service is what separates factoring from invoice discounting. With discounting you keep collecting your own debts. With factoring you hand that job over, which suits businesses that do not have the time or people to chase invoices well.
Factoring is not a loan. The funding available is linked to your sales ledger, so it can grow as you raise more invoices. Many facilities advance up to around 85 to 90% of each approved invoice, with the rest released when your customer pays.
How invoice factoring works
Once a facility is set up, the cycle repeats every time you raise an invoice.
- 1
You raise an invoice
You deliver the work or goods and invoice your customer as normal, then send a copy to the lender.
- 2
The lender advances cash
The lender pays you an agreed percentage of the invoice. Once a facility is in place, this can often happen the same day.
- 3
The lender collects
Your customer pays the lender. The lender’s credit control team handles reminders and chasing.
- 4
You receive the balance
When the customer pays in full, the remaining balance is released to you, less the lender’s fees.
Who invoice factoring suits
Factoring works for businesses that sell to other businesses on credit terms and feel the gap between doing the work and getting paid.
Usually a good fit
- You invoice other businesses, not consumers, on 30 to 90 day terms
- You are growing faster than your cash allows
- You do not have a dedicated credit controller, or would rather not hire one
- Your customers are established businesses with a decent payment record
- You are a newer business that might struggle to get a loan or overdraft
Worth checking first
- You sell mainly to consumers or take payment upfront
- Your invoices are raised before work is complete or depend on milestones
- One customer accounts for most of your ledger (lenders may cap concentration)
- You would rather customers never deal with a third party (see confidential options)
- You need a one-off lump sum rather than ongoing working capital
What affects factoring costs
Every lender prices differently, which is why comparing matters. These are the main parts of a factoring facility’s cost.
Service fee
Covers ledger management and collections. Usually a percentage of the invoices you put through the facility, sometimes with a monthly minimum.
Discount charge
Interest on the money you actually draw, normally set as a margin over the Bank of England base rate and charged only while funds are out.
Recourse or non-recourse
With recourse, you carry the risk if a customer does not pay. Non-recourse includes bad debt protection, which costs more.
Contract terms
Look at minimum terms, notice periods, set-up fees and any charges for ending early. These can matter as much as the headline rate.
Factoring compared with other invoice finance
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.
Compare factoring lenders without the ring-round
Instead of approaching lenders one at a time, Factor Now checks your business and debtor ledger against the criteria of a panel of participating UK lenders and shows which could be a fit.
- 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 factoring questions
How much can I borrow with invoice factoring?
It depends on your debtor ledger rather than a fixed loan amount. Lenders typically advance up to around 85 to 90% of approved invoices, and the limit can rise as your sales grow. Facilities through Factor Now start from £25,001.
Will my customers know I use factoring?
Yes. With factoring the lender collects payment, so your customers pay the lender directly. If you want customers left unaware, look at confidential invoice finance.
How quickly can I get funded?
Once a facility is in place, funding against eligible invoices can often be released the same day. Setting up a new facility takes longer because the lender carries out its own KYC, credit and underwriting checks.
What is the difference between recourse and non-recourse factoring?
With recourse factoring, you repay the lender if a customer fails to pay. Non-recourse factoring adds bad debt protection, so the lender absorbs approved bad debts. Non-recourse costs more and the protection usually has limits.
Do I need to factor every invoice?
Many facilities cover your whole sales ledger. Some lenders offer selective or single-invoice options. Which options are available depends on participating lenders and your business.
Is invoice factoring the same as a loan?
No. A loan is a fixed sum repaid over time. Factoring releases cash against invoices you have already raised, and the funding moves with your sales.
Does Factor Now lend the money?
No. Factor Now is a technology platform, not a lender. We match you with participating lenders, show indicative funding and pricing, and the lender you choose makes the final decision and provides the facility.