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The Questions That Decide Your Facility
Most businesses can narrow the choice quickly by answering a handful of practical questions. None of them is about the smallest headline figure. They concern control, visibility and risk, which are the factors that determine whether a facility still feels right a year after it starts.
Do you want someone else to chase payment?
If credit control takes up time your team does not have, a facility that includes collections may earn its keep. If you already run a disciplined accounts function, keeping that work in-house usually makes more sense.
Should customers be aware of the arrangement?
Some firms are relaxed about customers paying a third party. Others work in sectors where a visible finance arrangement could unsettle buyers, which points towards a confidential structure.
Whole ledger or selected invoices?
A business with steady monthly sales often benefits from an ongoing facility. One with occasional large contracts may prefer to fund specific invoices only when needed.
Do you sell overseas, and how exposed are you to a customer failing?
Export sales bring longer terms and cross-border collection issues. Heavy reliance on a few large customers raises the question of insolvency cover, which is worth considering alongside any funding. Invoice Factoring will ask about both early, because they change which funders are likely to be interested.
Types of Invoice Finance and What Each Delivers
Each service below is provided by a funder and arranged by Invoice Factoring. These short summaries are a starting point, and the linked pages explain eligibility, costs and the day-to-day running of each facility in more depth.
Factoring for funding plus collections
Invoice factoring releases cash against each approved invoice and passes the sales ledger to the funder's credit control team. It is a strong fit for growing firms that want working capital and fewer hours spent on reminders.
Discounting for established finance teams
Invoice discounting gives access to funds against the ledger while you keep handling customer accounts. Funders typically look for solid bookkeeping and a reliable collections record.
Selective factoring for flexibility
Selective invoice factoring, including single-invoice or spot factoring, lets you pick which invoices to fund. It suits contract-led businesses whose cash needs rise and fall.
Confidential factoring for discretion
Confidential invoice factoring keeps customer contact in your name while the funder provides the money behind the scenes. Eligibility is usually tighter than for disclosed facilities.
Export factoring for international trade
Export factoring supports firms invoicing buyers abroad, with the funder handling overseas collection under the agreement.
Bad debt protection for customer risk
Bad debt protection covers specified losses if an approved customer becomes insolvent, subject to credit limits and the provider’s terms.
How to Compare Invoice Factoring and Invoice Discounting
These are the two facilities businesses most often weigh against each other, and the deciding factor is usually who runs the sales ledger. With factoring, the funder issues statements, chases payment and handles routine queries. With discounting, all of that stays with your team, and the funder relies on regular reports from you.
Discounting tends to be confidential by default and is often reserved for businesses with higher turnover and well-documented credit control. Factoring is more accessible to smaller or younger firms because the funder has direct oversight of collections. When comparing the two, look at the total cost, the reporting burden on your staff and how comfortable you are with a third party speaking to your customers.
Combining Facilities and Credit Protection
Facilities are not always taken on their own. A common pairing is factoring with bad debt protection, sometimes described as non-recourse factoring, where the funder or an insurer bears specified losses if an approved customer fails. Under a recourse arrangement without that cover, your business generally remains liable if a customer does not pay.
Other combinations are possible too. An exporter might pair an overseas facility with credit protection on foreign buyers, while a firm on a discounting facility might use selective factoring for a one-off contract that falls outside its main agreement. Each addition carries its own cost and conditions, so it should earn its place. Invoice Factoring will show the cost of each element separately, letting you judge whether the extra cover or flexibility is worth paying for.
How Invoice Factoring Recommends and Arranges a Facility
Invoice Factoring starts by understanding the business, its invoices and its customers rather than a headline rate. We review your payment terms, customer spread and funding need, then recommend the facility type, or combination, that fits. Because the range covers six options, the advice is not limited to a single product.
Next, we arrange a facility with a suitable funder. The funder carries out its own assessment and due diligence and sets the advance, fees and terms, and all funding is subject to its agreement. We then explain the proposal in full, including every charge, the notice period and who does what, so you can decide with a clear view of the commitment.
As an example only, two quotes that both advertise a low percentage fee can produce very different annual costs once minimum charges and audit fees are added. Any fees connected with arranging the facility should be confirmed in writing before you proceed.
Get a Quote for the Facility That Fits
If one or two services already stand out, request a free quote using the form on this page. Tell us your annual turnover, monthly invoice value, usual payment terms and which facility you are leaning towards, along with any overdue or disputed accounts. You can also email info@invoicefactoring.org.uk.
Invoice Factoring will confirm whether your shortlist makes sense, suggest alternatives where another structure may suit you better and explain what the funder is likely to ask for. The quote is free and carries no obligation.