Invoice Factoring for UK businesses

Are you struggling with cashflow or to get your debtors to pay on time?

Invoice Factoring is a viable funding solution for many UK small businesses, such as Recruitment, construction and many more SMEs.

Invoice Factoring gives business owners, the opportunity to access cash from invoices but also the gift of time. The time you or your team spend managing your credit control. You can focus instead on achieving your business goals without the cashflow problems you were experiencing before invoice factoring.

Solve your cashflow problems with invoice factoring!

Business Invoice Factoring

What is business invoice factoring?

You may have heard that invoice factoring is like a loan. While the practice does have some similarities to loans, invoice factoring can be a more flexible option for improving cash flow without incurring long-term financial obligations.

Invoice factoring does not create any liabilities or put any assets at risk, so it does not qualify as a loan. It is not a credit agreement, and will not affect your standing with banks or lenders. Think of it as more of an advance on accounts receivable where your business does not take on any debt.

Invoice factoring or business factoring is where you sell your invoices, minus a small fee to an invoice factoring company. The invoice finance company will carry out due diligence, and then advance up to 95% of the invoice, providing immediate cash flow for you to use for your business needs.

The factoring company then takes care of your invoice and payment process, so you get to claw back some of your free time as you don’t have to chase customer payments.

With invoice factoring, you can access cash that is yours anyway – just sooner than expected. Allowing you to invest and grow your business.

Advantages of Invoice Factoring

Receive up to 95% of your sales invoice 

With Invoice factoring, approval is quick and easy. In most cases you can get paid for your invoices in 24 hours

Forward planning for success

Want to replenish stock? Invoice Factoring will mean no more waiting for your customers payments, allowing you to purchase supplies.

Supporting you and your business

The lender takes over the running of your credit control, a dedicated team of experienced professionals, who will manage your collections, reducing late payments and the risk of bad debts.

Your invoice factoring company grows with you 

The last thing a growing business needs is to incur more debt. Invoice Factoring allows you to get the capital you need when you need it, and grows as your business grows, without taking on a loan. 

Using Invoice Finance for Working Capital

Many businesses work on very thin profit margins, so it can sometimes be difficult to find the working capital necessary to expand. This has become even more obvious recently, as many companies have relied on government funding to make it through leaner months. This constraint on working capital can slow business growth, stifle investment and cause day-to-day problems within the business.


But, invoice factoring addresses these concerns by making money available that’s yours anyway. The only difference is that you get it sooner than planned.

Quick Apply Now!

It's easy to get started with our quick apply form.

Click the button on the right to bring up the application form.  Fill out a few simple questions and we will get back to you as soon as possible.

How does Invoice Factoring work?

Businesses that are using invoice finance do not have to wait for their customers to pay their invoices for them to pay suppliers, staff, and other overheads. Invoice Finance lenders will purchase your invoice and collect the payments from your customers. You do the work, sell the invoice, and typically get up to 95% of the invoice value immediately. Once they have received payment from your customer, they will send you the remaining balance, minus their fees and any other charges.

Asset based lending

Simple Guide:

1. You process the invoice to your clients
Provide your service or product, on your agreed terms.

2. Flexibility in the Invoices you sell
You can tailor your facility to gain funding from one invoice, multiple or your whole sales ledger. The Invoice Factoring Company will purchase the debt that has been agreed with you.

3. Receive up to 95% upfront
Most lenders will allow you to receive up to 95% of your invoice value

4. Cash Collection
The Invoice Finance company will manage credit control, and your customer pays the invoice factoring company directly

5. Receive final balance
Once payment has been received, the balance, minus and fees and charges will be made available to you.

Invoice Factoring Rates

Invoice Factoring costs vary from business to business. It is important that you understand the Invoice Factoring Costs associated with running an invoice factoring facility.

Application / Commitment Cost

Some lenders will charge a fee to carry out due diligence, and some do not.

Service Fee

The Invoice Factoring Costs will include a Service Fee for the day to day administration of the facility charged as a percentage of the gross invoice value.

Factoring services explained

As a business, you need to maintain funds to keep things running. However, many companies find it hard to get short-term loans without creating a heavy financial burden on the firm. Invoice factoring is an invoice financing option that can help companies quickly gain funds without creating debt.

Invoice FinanceInvoice factoring is a type of finance where you would sell your business invoices to an invoice finance company to raise funds and help improve your cashflow. With this invoice factoring service, you sell of all of your invoices to the factoring company. The agency then takes control of collecting the invoices and is responsible for contacting your customers directly.

Invoice factoring is a financial arrangement through which you can turn your debts or invoices into cash. When you sell your unpaid invoices to an invoice factoring company or a factor at a discounted rate, it is known as invoice factoring. The company pays you money against the invoice, and then they collect the payment from the customers when the invoice becomes due.

There are two types of invoice factoring:

Recourse: In recourse factoring, the business or the vendor bears the risk. If the customer does not pay the invoice, you will have to pay the money to your factor.
As the factoring agent takes over the invoice, they also take the risk associated with the client potentially not paying them. If the client then fails to pay the invoice, you will be asked to pay the balance, or substitute another invoice in its place. I.e. the agency will be able to take recourse against you for the invoice.
This is known as recourse factoring.

Non-recourse: In non-recourse factoring, the factor bears the risk, and you don’t have any liability if the customer refuses to pay the invoice.
With non-recourse factoring, the agent is taking the risk that the client fails to pay when the invoice comes due. So, for example if the client goes out of business or doesn’t pay, the factoring agent will lose the amount they paid you up front for the invoice. There will be no risk to you with non-recourse factoring.

Most UK factoring companies use recourse factoring. Very few financial lenders opt for non-recourse factoring, as the risk is more significant. If you want to compare quotes on recourse or non-recourse factoring, contact us today for a free quote.

Disadvantages of Invoice Factoring

We have outlined above the significant advantages of invoice factoring, but there are some potential disadvantages also:

It can be expensive: If you are worried about the fees the factor takes on discounting these invoices, maybe it is not the best option for you. You need to be careful about the late fees and any other charges the factor includes in the cost.

Unhappy customers: If you have sensitive customers, they may not respond well to being contacted by a factoring agency for invoice payments. It can potentially lead to the loss of customers, so make sure you select your factoring company with care. Alternatively, consider invoice discounting – read more here.

The main disadvantage of invoice factoring is that you do not get access to the full value of the invoice because of invoice factoring costs. However, greater control over your cash flow and freeing yourself to do more productive tasks are often worth the offset.

Invoice Factoring example

For example, you have £25,000 in unpaid invoices and agree to a 4% fee.

The invoice finance company agrees to forward you 85% upfront. You receive £21,250 on day 1 for the invoices.

The invoice finance company then collects the payments. Once they have collected them, they deduct their fee and forward you the remaining balance. So a further £2,750, which gives you access to a total of £24,000.

Get an invoice factoring quote for free – contact us today

Invoice financing vs factoring

Invoice factoring is a type of invoice finance. Whilst they are often used interchangeably, invoice finance covers other types of business finance.

Invoice finance can also include Asset-Based Lending (ABL), invoice discounting and more.

Whereas invoice factoring is where you sell all your invoices to a factoring company to save you time (chasing and collecting invoices) and boost your cashflow (by getting your invoices paid upfront).

If you have 90 day terms on your invoices, imagine what getting paid 90 days earlier could do to your business?

Further advantages of Business Invoice Factoring

What further benefits can invoice factoring bring to your business?

Invoice factoring may not work for all businesses. However, in an industry like construction, recruitment or where a few invoices can equate to large outstanding amounts, invoice factoring companies provide cash flow opportunities that help you grow.

UK Businesses also need access to capital to take advantage of situations like the following:

A slowing economy: Certain industries one of the first to experience a downturn in activity when the economy slumps. An injection of cash can often mean the difference between closing shop or making it through the downturn.
Help with slow-paying clients: Even the most reliable clients can have bad months that make them slow in paying. A large sum from an outstanding invoice will make it challenging to meet the many operational costs of running a company.

Take advantage of new opportunities: Outstanding invoices can add up to a significant sum and make it difficult to take on new jobs. A lack of working capital often means many businesses cannot take on new jobs and opportunities because there are not enough funds to get them started.

No need to worry about collecting: Managing collections from slow payers can be an unproductive use of your time. By taking advantage of small business invoice factoring, you lose the headache of chasing down customers yourself. Plus, you already have access to most of the funds they owe (minus the invoice factoring rates). The availability of invoice factoring companies provides an affordable means for companies to meet their financial obligations, grow their business, or take on new projects.

If you are looking for a reputable and reliable invoice factoring company in the UK, Ignite Business Group Ltd should be your first choice. With over 25 years of experience in the field, we can take care of all your invoice troubles. You can quickly get your invoices discounted or factored

Reach out to us at 01332 896 020 or fill out our online contact form to know more.

Quick Apply Now!

It's easy to get started with our quick apply form.

Click the button on the right to bring up the application form.  Fill out a few simple questions and we will get back to you as soon as possible.

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