Typical advance rates for invoice finance on public‑sector & tier‑one contractor invoices — Building services

If your building‑services business invoices public sector bodies or tier‑one contractors, those invoices are usually viewed as lower risk by funders and can attract significantly higher advance rates. Read on for quick ranges, what changes the rate, typical fees and reserves, and how to get a free eligibility check from specialist brokers and lenders who understand the construction supply chain.

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Quick summary

Typical advance rates for fully verified public‑sector or large tier‑one contractor invoices in building services usually fall between 80% and 95%. Exact rates depend on debtor credit, retentions and contract documentation; specialist products can approach 100% in tightly validated situations.

How invoice finance works — a short refresher

Invoice finance lets you unlock cash tied up in unpaid invoices. Funders typically pay an advance — a percentage of the invoice value — then collect the invoice when your debtor pays. The remaining balance is released to you after the funder deducts fees and any agreed reserve or holdback.

There are several models: factoring (disclosed to debtors, funder manages collections), invoice discounting (undisclosed, you collect), and selective invoice finance (pick specific invoices). Advance rate means the upfront percentage of invoice value the funder will pay.

Why public‑sector & tier‑one invoices attract higher advance rates

Public sector bodies and reputable tier‑one contractors are seen as lower credit risk. They usually have established payment processes, stronger credit profiles and centralised finance teams — all of which reduce the chance of bad debt or extended disputes.

Funders place real value on verified documentation: purchase orders, works acceptance certificates, electronic payment histories and clear contract references. Where these exist, funders are comfortable advancing a higher share of invoice value.

Typical advance rate ranges

Debtor / scenario	Typical advance rate	Notes
Central government / fully validated public‑sector invoices	85%–95%	Lowest perceived risk; reserves typically small.
Local authorities / housing associations (validated)	80%–90%	Good rates when POs and acceptance notes present.
Tier‑one contractors (large PLCs; verified)	80%–95%	Depends on debtor credit and contract certainty.
Invoices with retentions outstanding	60%–85%	Retentions are usually funded later or via separate retention finance.
SME contractors / sub‑contractors (higher risk)	60%–80%	Lower advances where debtor profile or paperwork is weaker.

• 85%–95% is common where funders accept the debtor as low risk and there is clear electronic validation.
• Some specialist funders can offer near‑100% advances on fully verified single‑debtor invoices or against completed works, usually for an additional fee or specific product terms.
• Retentions are treated separately; funders often apply lower advances or hold retentions until milestones such as practical completion or defects liability expiry.

Factors that change the advance rate

The headline range is only a starting point. Lenders assess many variables:

• Debtor credit & size: central govt and major PLCs rank highest; small contractors score lower. Tip: provide company registration and credit reports where possible.
• Invoice validation: purchase orders, works acceptance, completion certificates and digital trails increase confidence. Tip: get acceptance notes signed on site and upload quickly.
• Payment terms & history: 30‑day payment records support higher advances; long payment cycles reduce them.
• Debtor concentration: a single large debtor may be attractive (if strong) but some funders prefer diversified debtor books.
• Retentions, stage payments & bonds: retentions lower immediate advances; some funders offer tailored retention finance.
• Facility type: disclosed factoring can often produce higher advances than undisclosed discounting because the funder handles collections.

Fees, reserves & holdbacks: what to expect

Invoice finance costs include a mix of arrangement and ongoing charges. Key items:

• Discounting / funding fee: effectively an interest‑style charge applied to advanced funds. Typical effective monthly rates in building services often sit between 0.5% and 3% per month depending on risk and product.
• Arrangement / setup fee: one‑off fee — commonly a fixed sum or around 1%–2% of initial facility size.
• Service & admin fees: monthly account or admin fees may apply for ledger management, reconciliation and debtor chasing.
• Reserve / holdback: funders retain a portion (commonly 5%–20%) to cover disputes and chargebacks. For low‑risk public sector invoices reserves are often at the lower end (5%–10%).
• Retention financing: funding retentions is pricier and often subject to extended release terms or higher fees.

Always ask providers for representative APRs, clear examples of net proceeds on a sample invoice and an explanation of all exit costs and penalties.

Real‑world example

Example: an M&E sub‑contractor issues £100,000 of validated invoices to a local council with 30‑day terms. A funder offers a 90% advance = £90,000 upfront. The funder holds a 10% reserve = £10,000. If the discounting fee equates to 1.0% per month and an arrangement fee of 0.5% applies, the client receives the advance immediately, uses it for cashflow, and receives the reserve (less fees) when the council pays. This demonstrates how invoice finance can unlock substantial working capital quickly.

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How building‑services businesses can maximise their rate — practical checklist

• Include the correct PO or contract reference and attach acceptance/sign‑off documents to invoices.
• Keep an auditable electronic trail of works completion and handover notes.
• Separate retentions into a distinct funding discussion — many funders treat them differently.
• Use disclosed factoring if customer relationships allow — it commonly supports higher advances.
• Reduce disputes with tighter site acceptance and snagging procedures.
• Shop around and use a specialist construction or building‑services broker — different funders target different risks.

How UK Business Loans helps — quick process & reassurance

UK Business Loans connects building‑services firms with lenders and brokers who specialise in invoice finance. We don’t lend ourselves; our role is to match your enquiry to partners who understand construction cashflow and retentions.

1. Complete a short enquiry — it takes under 2 minutes.
2. We match you with suitable funders and brokers experienced in building services.
3. Receive a free eligibility check / quote from matched partners — often within hours.

We help you compare likely advance rates, fees, reserves and release terms so you can choose the solution that best fits your project pipeline and working‑capital needs.

Start Your Enquiry
UK Business Loans is an introducer — we do not lend. Submitting an enquiry is free and will not affect your credit score.

For more background on invoice finance products see our Invoice finance explained page, and to explore other construction funding options visit our construction business loans guide. To learn about our process, see how it works. For details on data handling consult our privacy policy.

If you’d like a broader discussion about funding specifically tailored to trades and contractors, we also cover wider options in our building services business loans resource.

FAQ

What advance rate can I expect on retention sums?

Retentions typically attract lower advance rates — often between 40% and 75% — and are usually released only after practical completion or expiry of defects liability periods. Specialist retention finance is available but usually at higher cost.

Does having a tier‑one contractor as debtor guarantee a top advance?

No — tier‑one status helps, but funders still require verification: signed POs, evidence of works completion and consistent payment records. Where evidence is strong, advances commonly sit in the 80%–95% band.

Can I get a near‑100% advance?

Some specialist funders offer very high advances for single verified invoices or where additional security exists, but this is not the norm. Typically a small reserve and fee remain.

Will applying through UK Business Loans affect my credit score?

No — submitting an enquiry does not affect your business or personal credit score. Lenders or brokers may carry out checks later if you proceed with an application.

Ready to unlock working capital from public‑sector or tier‑one invoices?

Get a free eligibility check and see realistic advance rates and costs for your invoices. Complete our short enquiry and we’ll match you to specialist lenders and brokers who understand building services cashflow.

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UK Business Loans is an introducer — we do not lend. Submitting an enquiry is free and will not affect your credit score. Funding offers are provided directly by lenders or brokers.

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Author: UK Business Loans — reviewed by our Partnerships team. Figures and ranges above are typical market examples and are not a guarantee of any specific outcome. Products and fees vary; contact us for a tailored quote. Content reviewed on: 30 October 2025.

1. What advance rates can I expect for public‑sector and tier‑one contractor invoices?
Typical advance rates for fully validated public‑sector or tier‑one contractor invoices are usually 80%–95%, with specialist products sometimes approaching 100% in tightly validated cases.

2. How much advance can I get on retention sums for building‑services contracts?
Retentions generally attract lower advances, often between 40% and 75%, and are usually released only after practical completion or the defects liability period unless separate retention finance is agreed.

3. What’s the difference between factoring and invoice discounting, and which gives higher advances?
Disclosed factoring (where the funder manages collections) typically supports higher advance rates than undisclosed invoice discounting because the funder assumes more collection risk.

4. What fees, reserves and holdbacks should I expect with invoice finance for building services?
Expect discounting/funding fees commonly around 0.5%–3% per month, arrangement/setup fees of about 1%–2% of facility size, ongoing admin fees, and reserves/holdbacks usually 5%–20% (lower for low‑risk public‑sector invoices).

5. Will submitting an enquiry through UK Business Loans affect my credit score?
No — submitting an enquiry for a free eligibility check does not affect your business or personal credit score; lenders may only run checks if you proceed with an application.

6. How quickly will I receive an eligibility check or quote after enquiring?
You will often receive a response and a free eligibility check or quote from matched lenders or brokers within hours of submitting your enquiry.

7. What documentation increases my chances of a higher advance rate?
Providing purchase orders, signed works acceptance or completion certificates, clear contract references and electronic payment history materially improves your chances of higher advances.

8. Can sole traders, start‑ups and SMEs in building services access invoice finance via UK Business Loans?
Yes — sole traders, start‑ups and established SMEs can be matched with brokers and lenders for invoice finance, though advance rates depend on debtor strength and supporting documentation.

9. Is it possible to get a near‑100% advance on a single verified invoice?
Some specialist funders may offer near‑100% advances on single fully verified invoices or completed‑works claims, but this is uncommon and typically involves higher fees or specific product terms.

10. Is the UK Business Loans enquiry form a loan application and am I obliged to proceed?
No — the enquiry form is a free, no‑obligation eligibility check used to match you with suitable lenders or brokers and is not a formal loan application.