How to Choose an Invoice Finance Provider

Ask for a worked example based on your actual turnover showing the service fee, discount charge, and all additional fees (audit fee, CHAPS transfer charges, credit limit fees, credit protection if applicable). The annual headline rate can look reasonable while additional fees push the real cost 20–40% higher. You want one number: total annual cost in £.

Most whole-turnover facilities run 12–24 months. Many auto-renew unless you give 30–90 days notice before the end date. Miss that window and you are locked in for another year. Ask: what is the minimum term, how does the rollover work, and what is the notice period?

Some providers charge the remaining months of the minimum fee. On a £600k facility paying 1.5% service fee (£9k/year), exiting 6 months early could cost £4,500. Others have no exit penalty. This is negotiable before you sign — always try to reduce or remove it.

The advertised advance rate (say 85%) might apply to most invoices but not all. Disputes, invoices over 90 days, certain customer types, or invoices that exceed a customer's credit limit can all result in lower advances or invoices being excluded from the facility. Ask what percentage of your actual ledger will be funded.

Recourse means if your customer does not pay, you buy the invoice back — the bad debt is yours. Non-recourse means the provider takes the hit if a customer becomes insolvent (though disputes and fraud are still usually your problem). Non-recourse is more expensive but protects you if customers go under. Most UK invoice finance is recourse — make sure you know which you are getting.

Most providers cap the proportion of your funded ledger that can come from a single customer — typically 25–40%. If one customer makes up most of your turnover, they may only fund up to that limit against their invoices, leaving you with less access to cash than you expected. Ask what the concentration limit is and how it applies to your specific customer mix.

With factoring, the provider collects directly from your customers — so yes, customers will know. With discounting, you collect yourself and it stays confidential. If you have long-standing customer relationships that matter to you, confidentiality may be a factor. Ask specifically which arrangement they are offering you and whether you can switch between the two.

This is where things get complicated. Ask exactly what the process is when a customer disputes an invoice. Who handles the dispute? Does the advance get recalled while it is being resolved? How long does the resolution typically take? A provider who handles disputes professionally is worth more than a slightly lower headline rate.

Some providers will not fund invoices to public sector customers, invoices with long payment terms (over 90 days), invoices with retention clauses, or invoices from customers in certain countries. If any of this applies to your business, ask upfront — finding out after you have signed that 30% of your ledger is excluded is not a good day.

Ask who your account manager will be, how you contact them, and what the average response time is. Some providers are largely automated and fine with that. Others are more hands-on. If you have a complex ledger or awkward customers, you want a provider who picks up the phone. Ask for references from businesses of a similar size to yours.