Can invoice finance support engineering businesses with 60–120 day payment terms?

Summary: Yes — invoice finance (factoring, invoice discounting and retention finance) can be an effective way for engineering companies to bridge cashflow gaps caused by 60–120 day payment terms. Suitability depends on the type of invoices (certified progress claims vs pro forma), debtor credit quality, retentions and ledger quality. Typical advance rates range from around 70–90% of invoice value with representative fees that increase for longer payment cycles. For a no‑obligation, free eligibility check and tailored quotes from specialist lenders and brokers, Get Quote Now — Free Eligibility Check.

What is invoice finance?

Invoice finance is a collective term for products that convert unpaid invoices into working capital. The two primary models are:

• Factoring — the provider (factor) buys your invoices and usually handles collections. It can be full-service and either recourse (you remain ultimately liable for bad debts) or non‑recourse (factor bears debtor insolvency risk).
• Invoice discounting (confidential) — you retain control of credit control and collections; the provider advances against your sales ledger on a confidential basis.

How it helps engineering: invoice finance unlocks cash tied in long payment cycles so you can pay suppliers, crew and equipment costs while waiting for certified milestones or buyer payment.

Why engineering businesses often have 60–120 day payment terms

Engineering projects commonly involve long lead times, staged milestone payments, certification/inspection processes, retentions, and payment terms set by large corporates or the public sector. These factors combine to create material timing mismatches between when you incur costs and when you receive cash.

What this causes: stretched working capital, constrained bid capacity, delayed supplier payments and difficulty scaling operations without external funding.

Can invoice finance cope with 60–120 day terms? Short answer + checklist

Short answer: Yes — invoice finance can support engineering firms with 60–120 day terms, but lenders assess the underlying debtor risk, invoice type and contract terms before offering facilities.

Checklist lenders look at:

• Debtor quality and credit rating (buyers with strong credit make long terms easier)
• Type of invoice (certified progress claims are stronger than provisional invoices)
• Retentions and whether retention release is contractually defined
• Sales ledger quality and historical days sales outstanding (DSO)
• Customer concentration (high reliance on one or two clients is a risk)

How invoice terms (60–120 days) affect advance rates & fees

Advance rate: providers typically advance between 70% and 90% of eligible invoice value. Longer payment terms usually reduce the advance rate or increase the ongoing finance charge because the provider’s capital is tied up for longer.

Fee structure (indicative):

• Set-up fee: one-off (can be a few hundred to a few thousand pounds depending on complexity).
• Service fee: monthly or as a percentage of turnover for administration (0.1–1%+ depending on service level).
• Discount/finance charge: effectively interest on the advanced amount — representative range might be 0.5–2.0% per month on invoice value for longer-term, higher-risk invoices (indicative only).
• Other fees: admin, audit, credit control or bad debt fees in some agreements.

Worked example (representative):

An engineering firm raises a certified invoice for £100,000 with a 90‑day payment term. Provider advances 85% = £85,000 immediately. When the buyer pays after 90 days the remaining £15,000 is due to you less the finance and service fees. Final net depends on the agreed discount rate and any additional charges. Representative only — actual terms set by lender.

Practical considerations for engineering firms (what lenders will check)

Lenders and specialist brokers will examine multiple operational and contractual factors:

• Invoice type and certification: Are invoices certified by an independent contract administrator? Certified milestone claims win better terms.
• Debtor profile: Public utilities or large corporates are often acceptable even on 90-day terms because credit risk is low; small private debtors are higher risk.
• Retentions and staged payments: Common in engineering — many factors will not include retentions until formally released, though retention finance specialists exist.
• Contract terms & certification process: Contracts that include clear certification and timescales reduce uncertainty.
• Sales ledger health: accuracy of invoices, dispute rates, historical DSO and aged debtor breakdown.
• Customer concentration: high concentration to one buyer often reduces advance rates or triggers special conditions.
• Security requirements: some providers may seek debenture or other security depending on product and company profile.

Practical steps to improve your application:

• Separate contract/retention invoices from other trading invoices in your ledger.
• Keep clear, certified paperwork and evidence of milestone approvals.
• Obtain direct debtor acknowledgement of invoices where possible.
• Work with a broker experienced in construction/engineering invoice finance.

When invoice finance may NOT be suitable

Invoice finance is not always the best solution. Typical limitations include:

• Businesses with very long retentions (e.g. retention released 12+ months after practical completion) without a retention finance solution.
• Poor debtor quality or high dispute rates — providers avoid financing disputed or irregular invoices.
• Extremely small invoice sizes below a provider’s minimum platform limits.
• Excessive concentration to an unrated single buyer with no verifiable payment history.

Alternatives to consider: asset finance, short-term business loans, bridging finance, supplier/supply-chain finance or specialist retention finance.

Special engineering solutions / add-ons lenders offer

• Retention finance: Product to release funds tied in contract retentions when contract conditions allow.
• Milestone / progress funding: Facilities that fund certified stages rather than waiting for final invoice payment.
• Supply chain finance / reverse factoring: Buyer-led programmes that accelerate supplier payment via the buyer’s credit.
• Hybrid packages: Combinations of invoice finance and asset finance to fund equipment and working capital together.

UK Business Loans specialises in matching engineering firms to lenders and brokers who offer these specialist options. For broader sector options see our engineering business loans page.

Application process and what you’ll need

Typical steps:

1. Complete a short enquiry — Free Eligibility Check — Get Quote Now.
2. We match you with specialist lenders/brokers suited to engineering and long payment terms.
3. Lender pre-approval and due diligence (credit checks on buyers may follow with consent).
4. Facility contract, onboarding and funding of eligible invoices.

Documents usually requested:

• Recent management accounts and/or last set of statutory accounts.
• Current aged debtor ledger and sample invoices.
• Copies of major contracts, purchase orders and milestone certificates.
• Bank statements and ID for company directors as required.

Timeframes: initial matching often within hours; full facility set-up from 2–14 days depending on complexity and whether retentions need specialist handling.

Typical example case study

Company: an engineering contractor turning over ~£2.5m with two principal clients (utility companies) paying on average 90 days and 5–10% retentions released at 12 months.

Problem: cash of £350k tied in certified invoices, limiting ability to tender for new contracts and meet supplier deadlines.

Solution: a combined confidential invoice discounting facility for certified milestone invoices (advance rate 80%) plus a retention finance line structured to release staged retention sums as they became contractually due.

Outcome: immediate liquidity allowed the business to mobilise two new projects and stabilise payroll. Working capital improved and the company could tender competitively for larger contracts. Representative example only; terms vary by lender.

Costs, transparency & compliance

Costs vary by provider and risk profile. Always ask prospective lenders for:

• A full fee schedule with examples for your typical invoice values and 60–120 day terms.
• Clarification whether the facility is recourse or non-recourse and what constitutes a chargeable event.
• Any onboarding, audit or ongoing administration fees in writing.

UK Business Loans does not lend or give regulated financial advice — we introduce you to lenders and brokers who can provide firm quotes tailored to your accounts and contracts.

Next steps — get a free personalised quote

Get Quote Now — Free Eligibility Check. Complete a short enquiry (no obligation) and we’ll match you with specialist invoice finance brokers and lenders who understand engineering payment mechanics. Most responses arrive within hours.

FAQs

Can invoice finance work with public sector clients on 90‑day terms?

Yes. Many providers will fund invoices to public sector bodies because buyer credit is strong. Funding and fees depend on whether invoices are certified and the buyer’s payment history.

Will lenders fund retentions?

Some lenders offer retention finance or will incorporate retentions once contractually released. Where retentions are held for long periods, specialist retention funding may be required.

How long does it take to set up invoice finance?

Initial matching is fast; setting up a facility typically takes 2–14 days depending on documentation, any required legal security and whether retention products are included.

Will invoice finance affect my relationship with clients?

If you choose confidential invoice discounting, clients may not know. With factoring, the factor may handle collections — good providers protect client relationships and act professionally.

What are advance rates and how are they calculated?

Advance rates are the percentage of invoice value paid up-front (commonly 70–90%). They reflect debtor credit, invoice type and concentration risk.

Can I still manage credit control or will the factor do it?

With invoice discounting you keep credit control. With full factoring the provider usually takes over collections; levels of control vary by product.

Will applying affect my credit rating?

Submitting an enquiry through UK Business Loans does not affect your credit score. Lenders may perform credit checks later with your permission.

What paperwork do I need for an initial enquiry?

Basic business details, recent accounts/management accounts, an aged debtor ledger and sample contracts or certified invoices help speed up matching to the right lender.

Ready to get started? Free Eligibility Check — Get Quote Now (short form, usually a response within hours).

Image suggestions for this page: engineering site/team meeting (alt: “Engineering contractor discussing invoice financing with broker”), flowchart of invoice-to-cash timeline (alt: “Flowchart showing invoice to cash timeline with 90-day terms”).

1. Can invoice finance support engineering businesses with 60–120 day payment terms?
Yes — invoice finance (factoring, invoice discounting and retention finance) can unlock cash for engineering firms with 60–120 day terms provided invoices are certified/eligible and debtor credit is acceptable.

2. Which invoice finance products suit engineering contractors with long payment cycles?
Certified progress invoice discounting, full-service factoring and specialist retention or milestone funding are the most common options for engineering businesses with long payment cycles.

3. What advance rates and fees should engineering firms expect for 60–120 day invoices?
Typical advance rates are around 70–90% of invoice value with representative finance charges roughly 0.5–2.0% per month plus set-up and service fees that rise for longer terms.

4. Will lenders fund contract retentions on engineering projects?
Some lenders provide retention finance or include retentions once contractually released, but long-held retentions often need specialist retention funding and may be excluded from standard facilities.

5. What do lenders check when assessing invoice finance for engineering businesses?
Lenders review debtor creditworthiness, invoice type and certification, retentions, sales ledger quality, historical DSO and customer concentration when assessing eligibility.

6. How long does it take to set up invoice finance for an engineering company?
Initial matching often happens within hours and full facility set-up typically takes 2–14 days depending on documentation, due diligence and any required legal security.

7. Will using invoice finance affect my relationship with clients?
Confidential invoice discounting keeps client relationships unchanged, whereas factoring can involve the provider contacting debtors, though reputable factors aim to preserve client relations.

8. Is invoice finance suitable if my business relies on a small number of large buyers?
It can be, but high customer concentration usually reduces advance rates or triggers extra conditions, so lenders will assess concentration risk closely.

9. What paperwork is needed to start an invoice finance enquiry for an engineering firm?
Provide recent accounts or management accounts, an aged debtor ledger, sample certified invoices and major contracts/purchase orders to speed up matching and assessment.

10. How does UK Business Loans help and will submitting an enquiry affect my credit score?
UK Business Loans is a free introducer that matches you with specialist lenders and brokers who understand engineering payment mechanics, and submitting an enquiry does not affect your credit score (lenders may carry out checks later with your permission).