What is invoice finance?

Updated October 2026

Invoice finance is a facility under which a business that sells to other businesses on credit terms assigns its unpaid invoices to a lender, receives an advance of part of each invoice’s value when it is raised, and receives the balance, less the lender’s charges, when the customer pays. The lender’s security is the book debts themselves, taken by assignment and usually by a charge over them, and its decision rests on the quality of the customers who owe the money more than on the borrower’s own balance sheet.

The facility rises and falls with the sales ledger: invoice more and more is available, invoice less and less is. That is what separates it from a loan of a fixed sum, and why it is used by businesses whose problem is waiting to be paid rather than a shortage of orders. We have access to a range of UK commercial finance lenders through our principal, White Rose Finance Group Limited. Each lender publishes its own advance rate, fees, minimum turnover and sectors and makes its own decision.

The two main forms

Factoring: the lender takes over the sales ledger, chases the customers for payment in its own name and collects the money directly, so the customers know a facility is in place. Invoice discounting: the business keeps control of its own credit control and collections, the customers pay into an account the lender controls, and the facility is usually confidential. Each lender publishes its own requirements for each, commonly a larger turnover and an established finance function for discounting, and which form a business uses is its own decision.

The variations

Whole turnover, where every invoice goes through the facility, against selective or single invoice finance, where the business chooses which invoices or customers to fund. Recourse, where the business repays the advance if the customer never pays, against non-recourse, where the lender carries some or all of the bad debt risk through credit protection it prices separately. Disclosed, where the customer is told, against confidential, where it is not. Each combination is a different product with its own fee structure.

What it costs, as a structure

Two charges on most facilities. A service fee, a percentage of the turnover put through the facility, for running it. A discount charge, interest on the money actually advanced for the days it is outstanding, priced over a reference rate. On top, where they apply: a fee for credit protection, a minimum annual fee on a whole-turnover facility, and the notice period’s cost if the business leaves early. Each lender publishes its own, and we set out what each provides so you can compare them; no rate appears on this page.

What defines it, and what it is not

Three things define it: the money is advanced against identified invoices for completed work, the lender takes an assignment of those debts, and the facility is sized by the ledger rather than by a fixed limit. It is not a loan, because nothing is advanced until an invoice exists and the advance is repaid by the customer rather than by instalments. It is not an overdraft, because the limit moves with the ledger rather than with the bank’s review. And it is not available to a business that sells to consumers or is paid upfront, because there is no business-to-business ledger to assign.

We work with UK limited companies and LLPs only, for business and commercial purposes. Enquiring does not affect your credit score. If you apply to a lender, it runs its own credit search, which may be recorded on your file.

Where to read next

The invoice finance page sets out the product in full with what lenders publish. The invoice factoring and invoice discounting pages explain each form on its own. The floating charge answer explains why a bank’s existing charge over book debts has to be released before invoices can be assigned, which is the first question an invoice financier asks.

Frequently asked questions

Is invoice finance the same as factoring?

Factoring is one form of invoice finance, the one where the lender collects from the customers. Invoice discounting is the other, where the business collects and the facility is usually confidential.

How much of an invoice is advanced?

Each lender publishes its own advance rate, which depends on the sector and the customers; invoices subject to retentions, stage payments or disputes are advanced against less or not at all.

Can a new business get invoice finance?

Invoice finance criteria centre on the customers’ invoices rather than the borrower’s trading history, so a young business with good customers is assessed on its ledger. Each lender publishes its own minimum trading time and turnover.

Is CapExpand regulated?

CapExpand Ltd (FRN 1060885) is a credit broker and an Appointed Representative of White Rose Finance Group Limited (FRN 630772), which is directly authorised and regulated by the Financial Conduct Authority. We are a broker, not a lender. We work with UK limited companies and LLPs only, for business and commercial purposes. If you have a complaint, our complaints page explains how it is handled.

How is CapExpand paid?

We will receive commission from lenders. On some cases we also charge a fee, which we set out in writing and agree with you before you proceed.

Cash from the invoices you have raised

Your turnover, who you invoice and the terms you trade on are enough for us to check the case against lenders’ published criteria before anything is sent anywhere.

Check your options

Sources

Checked 26 October 2026. This page defines the product; each lender publishes its own advance rate, fees and criteria, and nothing on this page is a quote.