Can I finance work-in-progress or only completed orders?

Most invoice finance providers only advance against completed, invoiced orders that have been delivered to the customer. Work-in-progress (partially manufactured goods still in your factory) typically cannot be financed. Some specialist asset-based lenders offer WIP financing, but it's more complex and expensive. The key is: once you've completed the order, delivered it, and raised an invoice, you can get 75-85% of the invoice value advanced within 24-48 hours.

What if my client rejects the product or claims defects?

If a client disputes an invoice due to quality issues, the finance provider will not advance funds until the dispute is resolved. This is why having robust quality control and clear terms & conditions with your customers is essential. Most disputes are resolved quickly (replaced parts, discount agreed, etc.), and the invoice is then paid. If the client refuses to pay entirely, you must repay any advance. This is standard recourse factoring — you remain responsible for invoice quality and customer creditworthiness.

Do I need to tell my customers I'm using invoice finance?

With invoice factoring (the most common type), yes — invoices are assigned to the finance company, and your customers pay them directly. Most B2B customers are familiar with this and don't view it negatively. With invoice discounting, no — you still collect payment from customers yourself, and they never know a finance company is involved. Discounting requires stronger credit control and is typically only available to businesses with £1m+ turnover.

Can startups or new manufacturers get approved?

Yes, but you typically need at least 6-12 months of trading history and creditworthy customers (established businesses, not startups selling to other startups). Providers assess your customers' creditworthiness more than yours. If you're selling to blue-chip companies, large distributors, or government contracts, you can get approved even as a relatively new business. Expect slightly higher fees in your first 1-2 years until you build a track record.

What about seasonal manufacturers (e.g., food, giftware)?

Invoice finance works well for seasonal businesses because the facility scales with your invoicing. In peak season (high invoicing), you get more cash. In quiet months (low invoicing), you pay lower fees. This is much better than a fixed overdraft that charges interest even when you're not using it. Just be aware: some providers have minimum monthly fees (£500-1000), so if you invoice almost nothing for several months, you're still paying that minimum. Choose a provider with no or low monthly minimums if your seasonality is extreme.

Can I finance work-in-progress or only completed orders?

Most invoice finance providers only advance against completed, invoiced orders that have been delivered to the customer. Work-in-progress (partially manufactured goods still in your factory) typically cannot be financed. Some specialist asset-based lenders offer WIP financing, but it's more complex and expensive. The key is: once you've completed the order, delivered it, and raised an invoice, you can get 75-85% of the invoice value advanced within 24-48 hours.

What if my client rejects the product or claims defects?

If a client disputes an invoice due to quality issues, the finance provider will not advance funds until the dispute is resolved. This is why having robust quality control and clear terms & conditions with your customers is essential. Most disputes are resolved quickly (replaced parts, discount agreed, etc.), and the invoice is then paid. If the client refuses to pay entirely, you must repay any advance. This is standard recourse factoring — you remain responsible for invoice quality and customer creditworthiness.

Do I need to tell my customers I'm using invoice finance?

With invoice factoring (the most common type), yes — invoices are assigned to the finance company, and your customers pay them directly. Most B2B customers are familiar with this and don't view it negatively. With invoice discounting, no — you still collect payment from customers yourself, and they never know a finance company is involved. Discounting requires stronger credit control and is typically only available to businesses with £1m+ turnover.

Can startups or new manufacturers get approved?

Yes, but you typically need at least 6-12 months of trading history and creditworthy customers (established businesses, not startups selling to other startups). Providers assess your customers' creditworthiness more than yours. If you're selling to blue-chip companies, large distributors, or government contracts, you can get approved even as a relatively new business. Expect slightly higher fees in your first 1-2 years until you build a track record.

What about seasonal manufacturers (e.g., food, giftware)?

Invoice finance works well for seasonal businesses because the facility scales with your invoicing. In peak season (high invoicing), you get more cash. In quiet months (low invoicing), you pay lower fees. This is much better than a fixed overdraft that charges interest even when you're not using it. Just be aware: some providers have minimum monthly fees (£500-1000), so if you invoice almost nothing for several months, you're still paying that minimum. Choose a provider with no or low monthly minimums if your seasonality is extreme.

Invoice Finance for Manufacturing

By LoanLensUpdated March 202611 min read

Key takeaways

Manufacturing cash flow gap: pay suppliers/wages upfront, customers pay 60-90 days later
Invoice finance releases 75-85% of invoice value within 24-48 hours of delivery
Typical cost: 2.0-3.0% of annual turnover (mid-range across sectors)
Scales with growth — more invoicing = more cash available (no fixed limits)
Most providers only finance completed, delivered orders (not work-in-progress)

Why Manufacturing Businesses Need Invoice Finance

If you manufacture products in the UK, you know the cash flow problem well: suppliers want paying upfront or within 14-30 days, wages are due weekly or monthly, but your customers pay on 60-90 day terms (sometimes longer for large contracts or export orders).

The working capital gap looks like this:

Week 1: Buy raw materials (steel, components, packaging) — payment due in 30 days: -£15,000
Week 2-3: Production (labor, overheads) — wages due Friday: -£8,000
Week 4: Deliver completed order, raise invoice for £30,000 — payment terms 60 days
Week 12: Customer finally pays — but you've already spent £23,000 and started 2-3 more orders

Result: You need £50,000-100,000+ working capital just to keep the factory running, even though you're profitable on paper. Every time you win a new contract, the cash gap gets bigger.

Why Overdrafts Don't Work for Manufacturing: Banks typically offer £20-30k overdrafts to small manufacturers. That's enough for 1-2 weeks of materials and wages. If you land a £50k order, you literally can't afford to take it. Invoice finance solves this: the facility grows with your invoicing, so larger orders = more cash available.

How Invoice Finance Works for Manufacturers

Invoice finance (invoice factoring is the most common type for manufacturers) works like this:

You complete an order and deliver it to your customer (quality checked, delivery note signed)
You raise an invoice as normal (e.g., £20,000 for 500 precision components)
You submit the invoice to your invoice finance provider (usually via online portal or email)
The provider advances 75-85% within 24-48 hours (£15,000-17,000 in your bank account)
Your customer pays the invoice finance company directly in 60-90 days (invoice shows their payment details)
You receive the remaining 15-25% (minus fees) once your customer pays

The key benefit: you get most of your cash within 24-48 hours instead of waiting 60-90 days. This lets you pay suppliers on time (securing early payment discounts), avoid overdraft charges, and take on larger orders without cash flow panic.

See what invoice finance would cost for your manufacturing business and how much working capital you could access.

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What Invoice Finance Costs for Manufacturers

Invoice finance for UK manufacturers typically costs 2.0-3.0% of turnover per year. This is mid-range compared to other sectors (recruitment is cheaper at 1.5-2.5%, construction is more expensive at 3-4.5%).

The cost has two parts:

1. Service Fee (0.75-1.5% of turnover)

Also called the "discount fee" or "factoring fee." This covers administration, credit control (chasing your customers for payment), and risk. Paid monthly based on your invoicing volume.

2. Discount Charge (7-12% annual interest on the amount advanced)

Also called the "finance charge." This is interest on the cash advanced to you (the 75-85% you get within 24-48 hours). Only charged for the days the money is outstanding. If your customer pays in 60 days, you pay 60 days of interest.

Why Manufacturing Rates Are Mid-Range: Manufacturers typically have established business customers (other manufacturers, wholesalers, retailers) with good creditworthiness. This lowers risk for the finance provider, reducing fees. However, there's a risk of product disputes (quality issues, wrong spec, delivery damage), which increases fees compared to low-risk sectors like recruitment.

Worked example: £800,000 turnover precision engineering business

Business profile:

CNC machining, aerospace and automotive components
£800,000 annual turnover
Average invoice: £15,000
Client payment terms: 60 days
Current working capital: £40,000 (maxed overdraft + directors' personal funds)

Current cash flow problem:

Raw material costs: £12,000/week (steel, aluminum, cutting tools)
Wages: £6,000/week
Production time: 2-3 weeks per order
Clients pay 60 days after delivery = £100,000+ cash tied up before first payment arrives
Result: Can only run 2-3 orders concurrently (limited by working capital, not factory capacity)

With invoice factoring (80% advance rate, 2.5% total cost):

Complete £15,000 order, raise invoice
Receive £12,000 within 24 hours (80% advance)
Pay suppliers on time: £9,000 (often secure 2% early payment discount = £180 saved)
Client pays finance company in 60 days, manufacturer receives remaining £3,000 minus fees
Annual cost: 2.5% of £800k = £20,000/year

Outcome: £80,000 working capital released. Business takes on major aerospace contract (£200k/year additional revenue). Can now run 6-8 orders concurrently. Turnover grows to £1.1m. Early payment discounts from suppliers offset ~10% of invoice finance costs. Owner no longer using personal credit cards for wages.

Advance Rates for Manufacturing

Manufacturers typically receive 75-85% advance rates on invoiced sales. This is standard across the industry. The remaining 15-25% is held as a reserve to cover:

Product disputes — customer claims components don't meet spec, wrong quantity, delivery damage
Credit notes — returns, replacements, discounts agreed after invoicing
Invoice finance fees — deducted from the reserve when the customer pays

Higher advance rates (85-90%) are possible if:

You have blue-chip customers (FTSE 350, large PLCs, government contracts)
Very low dispute history (strong quality control, clear T&Cs)
Consistent invoicing (not sporadic large orders)

Lower advance rates (70-75%) if:

High customer concentration (one client = 50%+ of sales)
Export orders (longer payment times, currency risk)
History of disputes or high credit note volume

Manufacturing Invoice Finance vs Bank Overdraft

Many manufacturing businesses compare invoice finance to extending their overdraft. Here's how they differ for a typical £800k turnover manufacturer:

Feature	Invoice Finance (Factoring)	Bank Overdraft
Amount available	£120k+ (80% of £150k typical outstanding invoices)	£30-50k typically (fixed limit)
Annual cost	2.0-3.0% of turnover (£16-24k for £800k turnover)	8-12% on amount used (£3-6k if always at £50k limit)
Scales with growth?	Yes — more invoicing = more cash available	No — fixed limit, requires annual review to increase (if bank agrees)
Requires security?	No — invoices are the security	Yes — personal guarantee, often charge over business/personal assets
Customers know?	Yes — pay the finance company (but most B2B customers don't care)	No — they pay you directly
Credit control included?	Yes — provider chases late payers (saves ~5 hours/week admin)	No — you chase customers yourself
Approval speed	7-14 days (assesses your customers' credit, not yours)	4-8 weeks (full business review, personal credit check)

Key insight: Invoice finance costs more in absolute terms (£16-24k/year vs £3-6k/year for an overdraft), but it unlocks 2-4x more working capital, scales with growth, and includes credit control. For fast-growing manufacturers or those winning larger contracts, it's often the only viable option.

Qualifying for Manufacturing Invoice Finance

Most invoice finance providers require:

6-12 months trading history — some providers accept startups, but you need customers
Invoice B2B customers — other businesses, not consumers (B2C requires specialist providers)
Creditworthy customers — established companies with trading history (not startups selling to startups)
30-90 day payment terms — standard B2B terms (not immediate payment or 180+ days)
£100k+ annual turnover — minimum for most providers (some go lower for £50k-100k but fees are higher)
UK-based — you and your customers must be UK businesses (export finance is separate)

Good News for New Manufacturers: Invoice finance providers assess your customers' creditworthiness, not yours. If you're a 1-year-old manufacturing startup selling to established distributors, retailers, or large manufacturers (e.g., BMW, Rolls-Royce, Siemens), you can get approved even with limited trading history. The provider is lending against your customers' ability to pay, not your balance sheet.

Pros and Cons for Manufacturing Businesses

Pros

✓Solves the working capital gap — get cash within 24-48 hours instead of 60-90 days
✓Scales with growth — more invoicing = more cash available (no fixed limits)
✓No asset security required — invoices are the collateral (no charge over factory or equipment)
✓Credit control included — provider chases late payers (saves 5+ hours/week)
✓Fast approval — 7-14 days (much faster than bank loans)
✓Accessible to new businesses — focuses on customer credit, not your trading history

Cons

✗Customers know — invoices show the finance company's payment details (most B2B customers don't care, but worth noting)
✗More expensive than an overdraft — 2-3% of turnover vs 8-12% overdraft interest (but unlocks 3-4x more cash)
✗Only finances completed orders — can't access cash for work-in-progress or raw materials you've bought but not invoiced yet
✗Recourse agreement — if your customer doesn't pay, you must repay the advance (you're responsible for credit risk)
✗Product disputes delay payment — if customer claims defects, finance is withheld until resolved
✗12-24 month minimum contract — early exit can incur fees (though many providers now offer 3-6 month rolling contracts)

Frequently Asked Questions

Use our calculator to see costs, advance amounts, and compare to your current financing for your manufacturing business.

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Next Steps

If you're a UK manufacturer considering invoice finance:

Calculate your working capital gap — how much cash is tied up in unpaid invoices right now? (List all invoices over 30 days old and total them)
Use our cost calculator (above) to see what invoice finance would cost for your turnover and compare to your current overdraft/financing costs
Check your customer payment terms — invoice finance works best when most customers pay in 30-90 days (not immediate payment or 120+ days)
Review dispute history — high dispute rates (quality issues, returns) increase fees or disqualify you. If disputes are common, fix your quality control first
Get quotes from 3-4 providers — rates and terms vary significantly. Compare service fees, discount charges, advance rates, and contract lengths

Independent Help Finding the Right Provider: Invoice finance providers vary significantly in rates, advance rates, and how they handle manufacturing businesses (some prefer it, others avoid it). Using a broker can help you compare multiple providers quickly. LoanLens is independent and doesn't recommend specific brokers, but comparing 3-4 quotes is essential to get competitive rates.

Want Help Finding the Right Invoice Finance Provider?

Tell us about your manufacturing business and we'll help you understand your options. Independent, no obligation.

Want Help Finding the Right Invoice Finance Provider?

Tell us about your manufacturing business and we'll help you understand your options.

Related Guides

Disclaimer: This guide provides information only and does not constitute financial advice. Invoice finance costs, terms, and availability vary by provider and your business circumstances. Always compare multiple quotes and read contracts carefully before committing. LoanLens is an independent information website — we are not a lender, broker, or financial adviser. Last updated: 16 March 2026.

Sources:

UK Finance (2025), Invoice Finance and Asset Based Lending Report 2024-25
Federation of Small Businesses (2026), Late Payment Crisis: Impact on UK Manufacturers
British Business Bank (2025), Small Business Finance Markets Report 2024/25
Make UK (2026), Manufacturing Barometer Q1 2026

LoanLens provides information and educational tools to help you understand your business finance options. We do not provide financial advice. Calculator results are estimates based on indicative market rates — they are not quotes or guarantees. Actual costs depend on your business circumstances, sector, and provider terms.