Bad Debt Protection Arranged Alongside Your Invoice Finance Facility

Bad debt protection arranged through a provider

Invoice Factoring arranges bad debt protection through a funder or separate provider, usually alongside an invoice finance facility, so a qualifying customer failure costs your business less. The provider supplies the protection, decides which customers it will cover, sets the limits and handles any claim. Invoice Factoring does not insure or underwrite anything.

Cover for defined non-payment events

Protection reduces the financial impact of specified events, most commonly customer insolvency and, under some agreements, prolonged non-payment after a set waiting period. Attached to a factoring facility, it creates what is known as non-recourse factoring: for a qualifying loss on a protected debt, the provider rather than your business bears the agreed share. It is not a promise that every unpaid invoice will be paid, and you will usually retain part of each loss.

Our part, and the provider's

You share your largest balances, payment terms and loss history through the form or by email. We review your customers and terms, then identify a funder or provider able to offer protection alongside a facility suited to your ledger. The provider assesses your customers and sets a protected limit for each one it accepts. We then explain the covered events, exclusions, retained share and cost, and you decide whether to take it.

The quote is free and you are under no obligation. You get a plain-English account of the full cost and your duties under the cover, and if protection looks poor value for your ledger, we will tell you.

What protection can do for your cash flow

A single customer failure can wipe out months of margin, especially when one or two accounts make up a large share of the ledger. Customer insolvency cover turns part of that open-ended risk into a known cost. It can also give you more confidence to extend credit to bigger buyers, because the provider's credit checks and limits offer an independent view of each one.

When protection sits within a factoring facility, a qualifying loss is dealt with under one agreement rather than becoming a debt you must repay to the funder from your own reserves. Ongoing monitoring of customer limits can also flag warning signs before exposure grows, giving you time to adjust terms or reduce supply to a struggling customer.

Businesses with concentrated or higher-risk customer exposure

Protection matters most where losing one customer would cause serious harm: suppliers to construction, manufacturing, wholesale and recruitment, firms with a handful of large accounts, and exporters selling to buyers they cannot easily check. Some owners first consider it after an insolvency elsewhere in their supply chain.

Some arrangements cover the whole ledger, while others allow selected customers, which can work alongside selective invoice factoring. For overseas buyers, cover may be arranged with export factoring, subject to the provider's country appetite. Invoice Factoring will tell you honestly if your customer mix is unlikely to attract cover.

How customer limits shape your cover

Cover attaches customer by customer. The provider reviews each buyer's credit standing and sets a protected limit, which caps the amount it will consider in a claim on that account. Sales above the limit, or made after a limit has been reduced or withdrawn, usually fall outside the protection.

What protection does not cover

Late payment on its own, disputes over quality or delivery, and invoices raised before cover started are commonly excluded. Once protection is in place, check limits before accepting larger orders and report overdue accounts on time.

The price of protecting your receivables

Pricing may reflect turnover, the customers included, payment terms, loss history and the scope of cover. It may appear as a separate charge or be built into the factoring service fee, so ask exactly what it applies to and whether minimum fees apply.

As an illustration, if written terms covered 90% of an eligible £10,000 loss within the customer limit, the starting figure would be £9,000, leaving £1,000 with your business. An excess or exclusion could change that outcome, and this example does not describe the cover available to you.

Weigh the charge against the amount genuinely protected and the risk you keep. Any fees connected with arranging the facility should be confirmed in writing before you proceed.

Bad debt protection vs trade credit insurance

The two terms overlap, but the structure matters. Protection within a finance agreement is a contractual feature of that facility and usually ends when the facility ends. A standalone trade credit insurance policy is a separate contract with an insurer, with its own wording and claims process, and it can sit alongside any form of funding, including invoice discounting.

Ask whether the arrangement is insurance, who carries the risk and which documents govern it. Invoice Factoring makes sure this is clear before anything is described to you as protected, and we can explain the practical trade-offs between recourse and non-recourse terms for your ledger.

Exclusions, limits and claim conditions to check

• The exact events that trigger cover, and the waiting period for protracted default.
• Whether existing overdue invoices, related-party debts or overseas customers are excluded.
• The share of each loss you retain and any excess.
• Deadlines for reporting overdue accounts and disputes, and the evidence a claim requires.
• Consent needed before agreeing settlements, changing terms or starting recovery action.

Late reporting or supplying beyond a limit can leave a debt unprotected, so decide who in your business owns these tasks before cover begins.

Ask for a bad debt protection quote

Tell us your turnover, your largest customer balances, typical payment terms and any losses in recent years. Let us know whether you already use invoice finance and which customers or markets worry you most, and declare any current overdue accounts or disputes.

Use the form to request a protection quote or email info@invoicefactoring.org.uk. Invoice Factoring will explain which providers may consider your customers and what the cover would realistically include. Any protection, like any funding, is subject to the provider's assessment and written agreement.