How does UK Business Loans’ invoice finance work for UK SMEs?

Summary: Invoice finance turns unpaid B2B invoices into working capital quickly. UK Business Loans does not lend money — we match UK SMEs to specialised invoice finance lenders and brokers so you can get fast, no‑obligation quotes and a free eligibility check. Typical advances are 70–90% of invoice value and facilities are commonly from £10,000 upwards. Start your enquiry to compare options and receive tailored quotes from providers who understand your sector.

Author: UK Business Loans Editorial Team — Published: 01 Nov 2025 — Last reviewed: 01 Nov 2025

Table of contents

• What is invoice finance?
• Types of invoice finance
• Who can use invoice finance?
• Costs, rates and fees
• How UK Business Loans matches you to the right lender
• Application process & documentation
• Risks and things to consider
• FAQs
• Ready to release cash from unpaid invoices?

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What is invoice finance?

Invoice finance is a form of working capital that lets a business receive an advance against its unpaid B2B invoices instead of waiting 30, 60 or 90+ days for customers to pay. It’s especially useful where cash is tied up in sales that have been invoiced but not yet settled.

How it works in simple steps:

• You raise an invoice to a customer as normal.
• A lender or broker advances a percentage of that invoice value to your business (the advance rate).
• When your customer pays the invoice, the lender releases the remaining balance minus fees (and any retention).

Key mechanics to know

• Advance rate: typically 70–90% of the invoice value (illustrative).
• Reserve / retention: the withheld portion (often 5–20%) kept until the invoice is paid.
• Fees: a discount/financing fee (percentage) and possibly service/set-up charges.
• Bad debt protection: optional product to protect against non-payment (usually extra cost).

Example (illustrative only):

On a £50,000 invoice, a lender might advance 85% (£42,500). After the customer pays, the remaining £7,500 is released less fees — showing how you unlock cash quickly rather than waiting for payment.

Get Quote Now — Free Eligibility Check

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Types of invoice finance (which suits your SME?)

Invoice factoring

Factoring involves a third party buying or advancing against your invoices and often taking over collections and credit control. Good if you want to outsource debtor management and benefit from lender credit checks on your customers.

Invoice discounting

Discounting advances funds against invoices but keeps the arrangement confidential — your business retains collections and customer relationships. Suitable if you want to hide the facility from customers.

Spot factoring / single invoice finance

Short-term, one-off funding against a single invoice. Useful for occasional cashflow peaks without committing to a long-term facility.

Pros & cons — quick bullets

• Factoring: + outsources credit control; − customers may be aware of the factor.
• Discounting: + confidentiality; − you keep debtor management responsibility.
• Spot factoring: + flexibility; − usually higher per‑invoice costs.

Common industries that use invoice finance: construction, manufacturing, logistics, recruitment, wholesale and many B2B professional services.

Compare options — Get a fast quote

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Who can use invoice finance?

Invoice finance is designed for limited companies, LLPs and other registered businesses that issue B2B invoices. Facilities are typically arranged for organisations with recurring B2B sales and established credit profiles.

Eligibility & practical thresholds

• Typical facility sizes start from around £10,000 of funding (we match businesses seeking £10k and up).
• Lenders look at turnover, debtor book quality, customer creditworthiness and sector risk.
• Less suitable where invoices are mainly B2C, very small one-off invoices, or where a single customer represents an extremely high share of revenue without strong credit.

Free Eligibility Check

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Costs, rates and fees — what to expect

Invoice finance pricing varies by lender and depends on invoice profiles, industry, facility size and whether you choose factoring, discounting or spot options. Always treat examples as illustrative.

Typical fee elements

• Discount/finance fee: a percentage applied to the invoice value (often quoted as a monthly or annualised rate).
• Service fee: ongoing administration charge for managing the facility.
• Set-up and due-diligence fees: one-off costs in some cases.
• Bad-debt cover: optional insurance-style charge.
• Transaction fees: per-invoice processing charges may apply.

Illustrative example (not a quote): a small business might pay a blended cost equivalent to 1–3% of invoice value per month depending on the offer. Exact pricing will depend on lenders’ assessment.

Compliance note: all fees are lender-specific. UK Business Loans introduces you to providers who will give exact terms. We do not provide regulated financial advice.

Get a personalised quote — free

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How UK Business Loans matches you to the right invoice finance lender

Our role is to introduce your business to lenders and brokers who are most likely to meet your needs. We save you time and increase your likelihood of receiving relevant offers.

What happens after you submit an enquiry

1. You complete a short form (company details, turnover band, approximate invoice/debtors and contact info) — this takes around 2 minutes.
2. We match your submission to suitable lenders and brokers in our network based on sector, turnover and facility needs.
3. Relevant partners contact you with eligibility checks and tailored quotes. Many contacts are within hours; timelines vary by provider.

Data handling & confidentiality

• Your details are shared only with selected partners who match your enquiry.
• We treat data securely and only use it to find suitable finance options for your business. See our Privacy Policy for full details.

We typically match enquiries for facilities starting at £10,000 and above.

Start your enquiry — free quote

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Application process & documentation (step-by-step)

1. Submit enquiry: a short online form with business and contact details.
2. Initial contact: lender or broker discusses structure and requests documents.
3. Due diligence: typical documents requested include recent invoices, customer details, bank statements, proof of identity for directors, and management accounts.
4. Offer & onboarding: if acceptable you’ll receive facility terms and an onboarding schedule — funds can be available within days to a few weeks after approval depending on checks.

Note: lenders will conduct their own credit and affordability checks; you’ll be informed before any credit checks occur.

Start now — free eligibility check

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Risks and things to consider

Invoice finance is a powerful tool but not without trade-offs. Consider the following before proceeding:

• Customer relationships: factoring may mean customers receive communications from a third party; discounting is usually confidential.
• Cost impact: fees reduce margins — model your net profit after finance costs.
• Disputed invoices: responsibility for disputed or unpaid invoices depends on contract terms; check liability and recovery processes.
• Facility limits & renewal: lenders set credit lines and concentration limits; facilities are reviewed periodically.

Important: UK Business Loans introduces you to providers only. Always read lenders’ terms and ask them to clarify risks before you sign.

Ask our partners about risks — get a free quote

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FAQs

What is the difference between factoring and invoice discounting?

Factoring usually includes collections and credit control by the funder and is often visible to customers. Discounting is confidential: you keep managing collections and the funder provides advances.

How quickly can I access cash?

Many lenders can release funds in 24–72 hours after approval and any necessary checks; timing depends on documentation and provider processes.

How much of my invoice will I receive up front?

Typical advance rates range from 70–90% depending on invoice quality and sector — exact rates are lender-specific.

Will invoice finance affect my customer relationships?

Factoring may require customers to pay the factor and could change communications; discounting keeps arrangements confidential.

Does invoice finance affect my business credit rating?

Submitting an enquiry through UK Business Loans does not affect your credit score. Lenders may perform credit checks during application — you will be informed beforehand.

Can startups use invoice finance?

Startups with verified B2B invoices and predictable debtor profiles may be eligible, but providers will assess turnover, customer credit and trading history.

What industries use invoice finance most?

Construction, manufacturing, logistics, recruitment, wholesale and many B2B service sectors commonly use invoice finance.

What documents do I need?

Typical documents include copies of invoices, customer details, recent bank statements, company accounts and ID for directors.

How are fees charged?

Fees are usually a percentage of invoice value (discount/finance fee) plus any service or transaction charges; precise pricing is given by lenders after assessment.

Is invoice finance cheaper than an overdraft?

It depends on cost structure and the business case. Invoice finance converts receivables into cash and can scale with sales; compare quotes to decide which is best.

Is UK Business Loans a lender or giving advice?

We are an introducer. We do not lend or provide regulated financial advice. We connect you with lenders and brokers who will supply quotes and terms.

Still unsure? Get a free, no-obligation quote

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Ready to release cash from unpaid invoices?

If unpaid invoices are slowing your growth, our partners can help you unlock working capital fast. Complete a short enquiry and we’ll match you to suitable invoice finance lenders and brokers who can provide tailored quotes.

Get Started — Free Eligibility Check

UK Business Loans is an introducer. We do not lend or provide regulated financial advice. All terms, fees and lending decisions are provided by the lender or broker who contacts you. By submitting an enquiry you agree we may share your details with vetted lenders and brokers who may contact you by phone or email. Submitting an enquiry does not affect your credit score. See our Privacy Policy for more.

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For a clear explanation of invoice finance options and to compare offers tailored to your business, read more about invoice finance on our partner information page: invoice finance.

1. What is invoice finance and how can it help my UK SME?
Invoice finance converts unpaid B2B invoices into immediate working capital so your business can access cash tied up in receivables instead of waiting 30–90+ days for customer payments.

2. How much of an invoice will I receive up front?
Advance rates typically range from 70–90% of the invoice value, with the remainder (reserve) released after customer payment minus fees.

3. How much does invoice finance cost?
Costs vary by provider and product but typically include a discount/finance fee plus service or transaction charges, with illustrative blended costs often around 1–3% of invoice value per month and optional bad‑debt protection available at extra cost.

4. What’s the difference between invoice factoring and invoice discounting?
Factoring usually involves the funder taking over collections and customer contact (and may be visible to customers), while invoice discounting is confidential and leaves debtor management with your business.

5. Who can apply for invoice finance and what are typical minimums?
Invoice finance is aimed at registered UK businesses (limited companies, LLPs, etc.) that issue B2B invoices, with typical facilities starting from around £10,000 and eligibility based on turnover, debtor quality and sector risk.

6. How quickly can I get funds once I apply?
Many lenders can release funds within 24–72 hours after approval and completion of required checks and documentation, though timelines vary by provider.

7. What documents will lenders usually ask for?
Lenders commonly request recent invoices and customer details, bank statements, management accounts or company accounts, and ID for directors as part of due diligence.

8. Does submitting an enquiry through UK Business Loans affect my credit score or count as a loan application?
No — the short enquiry is just to match you with suitable lenders and does not affect your credit score, and any lender credit checks are carried out only after you are informed and proceed.

9. How does UK Business Loans match my business to the right invoice finance lender or broker?
You complete a quick form with basic company, turnover and invoice information, and we share it with vetted lenders and brokers who specialise in your sector to provide a free eligibility check and tailored quotes.

10. Which industries most commonly use invoice finance in the UK?
Common users include construction, manufacturing, logistics, recruitment, wholesale and many B2B professional services that regularly issue trade invoices.