Can I pair invoice financing with a term loan to speed up cash flow?

Summary (TL;DR): Yes — you often can. Invoice finance gives fast access to money already earned but not yet paid; a term loan provides a lump sum for investment, capex or refinancing. Used together, they can keep day‑to‑day operations running while funding growth or one‑off items. Success depends on eligible receivables, affordability of combined repayments, security arrangements and lender appetite. Not sure? Get a quick, free eligibility check — Get Quote Now.

Introduction — why businesses consider pairing products

Cash tied up in unpaid invoices and one-off investment needs are two of the most common reasons small and medium businesses stumble. Missed payroll, delayed supplier payments or lost growth opportunities can follow. For many firms the obvious solution is a mix: a short-term working capital product (invoice finance) to free immediate cash, plus a term loan to fund essential purchases or refinance expensive debt. This article explains how the two products work together, when pairing makes sense, the costs and legal points you should check before you commit.

Quick answer

Yes — often you can combine invoice finance and a term loan. Invoice finance (factoring or discounting) unlocks a percentage of invoice value quickly; a term loan supplies capital over months or years. Together they can stabilise day‑to‑day cashflow while funding investments. But you must model combined costs, check required security and confirm acceptable structures with lenders. For a free, no‑obligation eligibility check, Get Quote Now.

How it works: pairing invoice finance + term loan

First, the basics of each product:

• Invoice finance (factoring / discounting) — a provider advances a percentage (the advance rate) of your eligible invoices, typically 70–90% depending on sector and debtor strength. The facility charges a fee or discount rate and may include a monthly service fee. Some forms (factoring) include debtor collection; others (invoice discounting) leave collections to you.
• Term loan — a fixed amount borrowed and repaid over a set term with fixed or variable interest. Used for capital expenditure, refinancing, stock purchase or growth projects.

Common pairing approaches:

• Parallel facilities — separate invoice finance and term loan accounts, sometimes with different providers. Useful when you want specialist lenders for each product.
• Single-provider package — one lender offers both an invoice facility and a term loan. This can simplify security and reporting but may limit competitive pricing.
• Staged use — invoice finance provides immediate short-term liquidity while you apply for a term loan to refinance higher-cost short-term debt or fund capex.

Key operational points:

• Advance rates and fees determine how much usable cash you actually get — always model the net cash after fees and interest.
• Invoice finance is typically revolving (scales with sales), while a term loan is fixed. That combination can align working capital with growth while funding long-term needs.

Real-world scenarios where pairing helps

Below are typical examples that show when combining products makes commercial sense.

Seasonal retail: Retailers unlock cash from invoices and use a term loan to pre-purchase seasonal stock or refurbish premises out of season. Invoice finance covers daily payroll and supplier payments during peaks and troughs.

Construction & contracting: Long payment cycles create gaps. Invoice finance speeds cashflow for materials and labour; a term loan buys plant or bridges a large deposit for a new contract.

Scaling a services business: A fast-growing business uses invoice discounting to support rising operating costs while a term loan funds software, training, or a new office to support growth.

These combinations help avoid reliance on overdrafts or expensive short-term borrowing and can preserve supplier and staff relationships by smoothing payments.

Benefits and trade-offs

Benefits

• Faster conversion of sales to usable cash and improved day-to-day liquidity.
• Flexibility — invoice finance grows with sales; term loans provide predictable capital for larger investments.
• Potentially lower use of emergency or high-cost credit like overdrafts.

Trade-offs

• Combined cost — invoice facility fees plus term loan interest can be materially higher than a single product. Always run a monthly cashflow sensitivity showing net cash after fees and repayments.
• Security & covenants — multiple lenders increase legal complexity. Lenders may require charges over assets or personal guarantees.
• Administration — invoice finance often requires ongoing reporting and debtor processes; time and admin costs should be factored in.

Risks & compliance considerations

Major risks to be aware of:

• Intercreditor issues — if two lenders take security over the same assets, you’ll need intercreditor agreements or agreed priorities. This affects who gets repaid first in default.
• Higher gearing and covenant pressure — more debt increases the risk of covenant breaches if cashflow weakens.
• Hidden costs and triggers — read terms for hidden fees, reserve accounts, or triggers that accelerate repayment (e.g., change of ownership clauses).

Advertising and transparency: any public material or advertising should be clear, fair and not misleading. If you choose to advertise representative costs you must follow platform and regulatory rules. UK Business Loans connects you with lenders and brokers who can explain terms and provide quotes tailored to your business.

How lenders and brokers typically structure combined facilities

Common legal and commercial structures include:

• Single-provider bundle — the lender issues both facilities under a single security package. Easier to administer and avoids intercreditor negotiations.
• Multiple providers with intercreditor agreement — where specialists are used for each product, lawyers agree intercreditor terms allocating priority and remedies.
• Ring‑fenced assignment — invoice finance often requires assignment of receivables; term lenders may accept a secondary charge or ask that certain assets remain unencumbered.

Before signing, ask any broker or lender about:

1. Who takes primary security and what assets are included.
2. Whether intercreditor agreements are required and who pays related costs.
3. Reporting burden and how collateral realisation would work in a worst‑case scenario.

Practical checklist: is pairing right for your business?

Use this quick checklist to assess suitability:

• Do you have sufficient eligible invoices (creditworthy debtors) for invoice finance?
• Do you need longer-term capital for capex, acquisition or to refinance existing debt?
• Can your forecast comfortably cover both invoice facility fees and term loan repayments? (Run a monthly cashflow model.)
• Are you prepared to provide security or personal guarantees if requested?
• Do you want one provider handling everything, or are you better served by specialists for each product?

Still unsure? Request a free eligibility check and tailored matches from our panel — Free Eligibility Check.

How UK Business Loans helps

We don’t lend — we match businesses to lenders and brokers that specialise in invoice finance, term loans and combined solutions. Our typical process:

1. Complete a short enquiry (two minutes) describing your funding need and business basics.
2. We match you with specialist lenders and brokers who understand your sector and funding size (we work with deals from around £10,000 upwards).
3. Receive free, no‑obligation quotes and eligibility checks to compare options and decide which route is right.

Save time and increase your chance of a good outcome by letting us introduce you to the right partners — Get Quote Now.

FAQs

Final summary & next steps

Pairing invoice finance with a term loan can be an effective way to accelerate cash flow and fund growth — but it requires careful cost modelling and clear agreement on security and priority between lenders. If you have invoices to unlock and a longer-term need for capital, it’s often worth exploring both options together. Start with a short enquiry to receive tailored, no-obligation matches and quotes from experienced lenders and brokers — Get Quote Now — Free Eligibility Check.

Disclosure: UK Business Loans does not lend money. We connect UK businesses with finance providers and brokers to help you compare options. Our service is free to use and you are under no obligation to proceed.

Learn more about other business lending options on our business loans page: business loans.

1. Can I combine invoice finance and a term loan to speed up cash flow?
Yes — many businesses pair invoice finance (factoring or discounting) for immediate working capital with a term loan for longer‑term investment, subject to lender approval and security arrangements.

2. Will using invoice finance stop me getting a term loan?
Not necessarily — lenders assess your overall profile and may accept invoice finance alongside a term loan provided you agree security, covenants or intercreditor terms.

3. How do costs of invoice finance plus a term loan compare with an overdraft or other short‑term credit?
Costs vary by product and provider, so you should model combined fees, advance rates and interest against overdraft pricing and withdrawal risk to see which is cheaper for your situation.

4. What security or guarantees will lenders typically ask for when combining facilities?
Lenders commonly request charges over receivables, assets or property and may require personal guarantees or intercreditor agreements when multiple parties take security.

5. How quickly can I access funds with invoice finance versus a term loan?
Invoice finance can release cash against eligible invoices in days, whereas term loans normally take longer to underwrite and drawdown, often weeks.

6. Will submitting an enquiry through UK Business Loans affect my credit score?
No — making an enquiry via UK Business Loans does not affect your business credit score, although individual lenders may carry out credit checks if you progress to an application.

7. Is the enquiry form on UK Business Loans an application for finance?
No — the short enquiry form is just information to help UK Business Loans match you with suitable lenders and brokers, not a formal loan application.

8. What minimum and maximum funding sizes do you work with?
We typically match enquiries for funding starting from around £10,000 and up to multi‑million pound facilities depending on lender capacity.

9. What documents will I likely need to apply for invoice finance or a term loan?
Most lenders ask for business accounts, recent bank statements, a debtor list (for invoice finance), ID for directors/owners and details of existing debts and security, with exact requirements varying by lender.

10. How does UK Business Loans help me compare combined invoice finance and term loan options?
We connect you free of charge to vetted, FCA‑regulated lenders and brokers who specialise in invoice finance and term loans so you can receive tailored, no‑obligation quotes and compare terms quickly.