Non‑recourse invoice finance (with credit protection): how it works and what it costs

Summary: Non‑recourse invoice finance with buyer‑level credit protection unlocks cash tied up in your invoices and transfers the risk of buyer insolvency to the funder or insurer. Through UK Business Loans you can be matched quickly to specialist lenders and brokers who arrange non‑recourse facilities. Typical costs include a finance/discount fee (0.5%–2.5% per month), a credit protection premium (roughly 0.1%–1.5% p.a.), setup and transaction fees and a reserve holdback (5%–15%). Complete a short enquiry for a free eligibility check and tailored quotes.

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Quick summary: What is non‑recourse invoice finance?

Non‑recourse invoice finance is a form of debtor finance where a funder advances cash against your approved invoices and takes on the credit risk of your buyers — typically for buyer insolvency or prolonged inability to pay. It is often combined with credit protection (either insurer cover or a lender‑arranged guarantee) which sets which buyers and risks are covered and to what extent.

Contrast with recourse: in recourse facilities you remain liable if buyers don’t pay. Non‑recourse shifts that specific bad‑debt risk to the funder/insurer, but does not generally cover buyer disputes, chargebacks, or supplier/manufacturing defects unless explicitly included.

How it works — step by step

Step 1 — Enquiry & quick eligibility check

You provide basic details via a short enquiry form (takes ~2 minutes): company turnover, typical invoice sizes, key buyers and contact details. This is an information request only — not an application. UK Business Loans uses this to match you with the most suitable lenders and brokers, who then run more detailed checks if you proceed.

Step 2 — Buyer credit checks and coverage decisions

The funder or insurer assesses the creditworthiness of your buyers and agrees a list of ‘covered buyers’ and coverage levels. This can be a fully insured credit limit per buyer or a partial cover with limits and thresholds. Coverage depends on buyer size, sector and payment history.

Step 3 — Advance and reserve

Once invoices are approved, the funder advances a percentage (advance rate) of each invoice — typically 70%–90%. The balance is held in reserve to cover fees, chargebacks or adjustments and is released when the buyer pays and the claim/cover conditions are met.

Step 4 — Ongoing management

• The funder usually handles collections and monitoring of buyer credit.
• Regular reporting and reconciliations take place between your business and the funder.
• Premiums for credit protection may be invoiced monthly or annually.

Step 5 — If a covered buyer defaults

When the buyer suffers a credit event (insolvency or prolonged default as defined), the credit protection triggers and the funder/insurer pays the covered amount subject to policy terms, thresholds and any excesses.

When cover does not apply (common examples below), the facility may revert to recourse for that particular debt and you will remain liable.

Typical timing: preliminary approvals can be quick (24–72 hours) for well‑documented deals; full onboarding with buyer checks and assignment notices normally takes several days to a couple of weeks depending on complexity.

Who is it suitable for?

Non‑recourse invoice finance is best for limited companies supplying creditworthy corporate customers with predictable B2B payment terms. Common sectors: manufacturing, wholesale/distribution, logistics, construction (where buyers are larger firms), and contractors with strong debtor profiles.

• Typical minimum facility sizes start around £10,000 invoice value or facility value; many lenders prefer higher turnover profiles for non‑recourse cover.
• Not suitable if your business has persistent disputes with customers, very small consumer buyers, or very high debtor concentration in high‑risk buyers that insurers won’t cover.

Pricing: what you can expect to pay

Costs for non‑recourse invoice finance are typically made up of several components. Below are typical ranges; exact pricing depends on buyer credit, concentration, industry risk and deal size.

• Setup / due‑diligence fee: one‑off, often £250–£2,000 depending on complexity.
• Facility / annual fee: an annual or monthly facility fee (0.1%–1% p.a. of facility limit or flat fee).
• Discounting / finance fee (factoring fee): charged as a percentage of invoice value per month (commonly 0.5%–2.5% p/m). Some lenders quote a daily rate (annualised).
• Credit protection premium: the insurance premium to cover buyer default — typically 0.1%–1.5% p.a. of the covered turnover, depending on buyer risk.
• Reserve / retention: percentage withheld (often 5%–15%) until buyer settlement and claim validation.
• Transaction & admin fees: per‑invoice or monthly admin fees (£0–£25 per invoice typical).
• Collections fees: some funders charge additional fees for intensive collection activity.

Worked example (indicative)

Item	Amount
Invoice value	£100,000
Advance rate (85%) — funds to you on invoice	£85,000
Reserve retained (10%)	£10,000
Discount fee (1.2% per month on invoice)	£1,200
Credit protection premium (0.4% p.a. on invoice, pro‑rated 30 days)	£33
Net cash received initially	£85,000
When buyer pays after 30 days: reserve released (less fees)	£8,770 (approx)

Notes: this example is illustrative — reserve release depends on reconciliation and whether a claim is needed. Some lenders deduct fees from the reserve; others invoice separately.

Contract terms & common exceptions

Typical contract points and exclusions to watch for:

• Covered buyers list: only named buyers may be non‑recourse covered.
• Excluded risks: buyer disputes, short‑payments, set‑offs, internal fraud, incorrect invoice notification or late disclosure can void non‑recourse status.
• Assignment & notice: many non‑recourse deals require buyers to be notified that payments should be made to the funder.
• Policy thresholds: minimum claim amounts, excesses, and period before a claim is accepted (e.g., insolvency event or 120 days overdue).

Always read policy wording closely. UK Business Loans will introduce you to partners who can explain full terms and exclusions before you commit.

Benefits & drawbacks

Benefits

• Improves cash flow quickly — release working capital tied in receivables.
• Shifts buyer insolvency risk away from you for covered accounts.
• Can outsource collections and debtor management.

Drawbacks

• Higher cost than plain recourse facilities due to insurance/premia.
• Doesn’t usually cover disputes, fraud or operational errors.
• May require buyer notification — could affect customer relationships.

Alternatives to non‑recourse invoice finance

If non‑recourse isn’t right, consider:

• Recourse factoring (cheaper but business retains risk).
• Invoice discounting (confidential, typically recourse).
• Asset finance, short‑term business loans or an overdraft for smaller gaps.
• A blended solution — partial cover for major buyers and recourse for the rest.

How UK Business Loans helps — our process

We match businesses with specialist lenders and brokers who arrange invoice finance facilities. Our process:

1. Complete a short enquiry with essential details.
2. We assess and match you to partners who best fit your sector and buyer profile.
3. You receive free, no‑obligation eligibility checks and tailored quotes — providers will contact you to progress.

Our service is free to use and designed to save you time comparing options. Start a Free Eligibility Check and see who can support your funding needs.

For practical reading on broader invoice finance options, see our detailed guide to invoice finance.

What to prepare before enquiring

Have the following ready to speed up quotes:

• Recent aged debtor report and sample invoices (largest buyers highlighted).
• Turnover and recent accounts or management accounts.
• Details of any existing lending and whether invoices are already assigned.
• List of top 10 buyers with estimated annual spend.

Note: completing an enquiry does not affect your credit score.

Frequently asked questions

Is non‑recourse invoice finance completely risk free?

No — it commonly covers buyer insolvency/default but usually excludes disputes, fraud, late assignment or breaches of your contract terms.

How much of an invoice will I get up front?

Advance rates commonly range from 70% to 90% depending on buyer credit quality and concentration.

Will customers know I’m using invoice finance?

Non‑recourse products typically require assignment notices for covered buyers; confidential solutions are less common where full credit cover is required.

How quickly can I access funds?

Initial advances can be available within 24–72 hours after credit approval; full onboarding usually takes several days.

Will enquiring hurt my credit score?

No — submitting a form to UK Business Loans is an information request. Lenders may do checks later if you choose to proceed.

Final steps — get quotes and compare

Ready to unlock cash and protect your business from buyer insolvency risk? Complete a short enquiry and we’ll match you to the most appropriate lenders and brokers for a free, no‑obligation eligibility check.

Get Quote Now — Free Eligibility Check

Important: introducer information

UK Business Loans acts as an introducer — not a lender or financial adviser. We introduce businesses to lenders and brokers who set final offers and terms. Figures on this page are indicative only; actual costs and availability depend on provider assessment of your business and your buyers.

If you want personalised examples or a quick comparison, click Get a free eligibility check and one of our match specialists will be in touch.

1. What is non‑recourse invoice finance and how does buyer credit protection work in the UK?
Non‑recourse invoice finance is a form of invoice financing where a funder advances cash against approved invoices and, with buyer‑level credit protection (insurance or guarantee), assumes buyer insolvency risk for covered accounts subject to policy limits and exclusions.

2. How much of an invoice will I get up front (advance rate)?
Advance rates for UK invoice finance typically range from 70% to 90% of the invoice value depending on buyer credit quality, concentration and sector, with the remainder held in reserve.

3. How much does non‑recourse invoice finance cost in the UK?
Typical costs include a discounting/finance fee of around 0.5%–2.5% per month, a credit protection premium of about 0.1%–1.5% p.a., plus setup, facility, transaction fees and a reserve holdback.

4. Will my customers know I’m using invoice finance or will I need to notify buyers?
Many non‑recourse facilities require assignment notices to covered buyers so payments are made to the funder, although some lenders offer confidential discounting in limited circumstances.

5. Is non‑recourse invoice finance completely risk free for my business?
No — non‑recourse commonly covers buyer insolvency or prolonged non‑payment but usually excludes buyer disputes, short‑payments, set‑offs, fraud and breaches of assignment terms.

6. How quickly can I access funds through invoice finance when matched via UK Business Loans?
If your buyers are credit‑approved, initial advances can be available within 24–72 hours, while full onboarding and buyer checks typically take several days to a couple of weeks.

7. Will submitting an enquiry with UK Business Loans affect my business credit score?
No — completing UK Business Loans’ short enquiry form is an information request that does not affect your credit score; partner lenders may run checks later if you proceed.

8. Which businesses are best suited to non‑recourse invoice finance?
Non‑recourse invoice finance suits limited companies with creditworthy B2B customers and predictable receivables—common users include manufacturers, wholesalers, logistics firms and contractors with larger buyers.

9. What documents should I prepare to get accurate invoice finance quotes?
Prepare a recent aged debtor report, sample invoices (highlighting largest buyers), turnover and management accounts, details of existing lending and a list of your top 10 buyers.

10. What are the main alternatives if non‑recourse invoice finance isn’t right for my business?
Alternatives include recourse factoring, confidential invoice discounting, asset finance, short‑term business loans or a blended solution combining partial credit cover with recourse financing.