Invoice Finance and Factoring

Invoice finance releases the cash tied up in your unpaid invoices, so you do not have to wait 30, 60 or 90 days to get paid. It improves liquidity, cuts debtor days and makes cash flow predictable, and because the facility is secured against your sales ledger it grows as the business grows rather than sitting at a fixed limit. Sadi's Commercial Finance is an NACFB and FIBA registered commercial finance brokerage and arranges invoice finance and factoring facilities suited to your customers and sector.

Who it is for: businesses that invoice other businesses on credit terms, particularly recruitment, wholesale, distribution, manufacturing, haulage, construction services and professional services, where late payment strains cash flow.

How invoice finance works

You raise an invoice as normal. The provider advances a percentage of its value, commonly 80 to 90%, usually within 24 hours. Your customer pays on their normal terms. When they pay, the remaining balance is released to you less the provider's charges.

The facility revolves. As you raise more invoices, more funding becomes available, and as invoices are paid, the availability replenishes. That is the fundamental difference between invoice finance and a loan or an overdraft: it scales with turnover instead of needing renegotiation every time you grow.

The main types

  • Invoice factoring, where the provider advances against invoices and also runs credit control and collections for you. Your customers know the facility exists.
  • Confidential invoice discounting, where you keep collections in your own name and customers need not know. Usually requires a more established business with proper credit control in place.
  • Selective or spot factoring, where you fund individual invoices or specific customers rather than the whole ledger.
  • Whole turnover facilities, where the entire sales ledger is funded, normally at a better price than selective.
  • Payroll and recruitment finance, structured around weekly pay runs rather than a monthly cycle.
  • Construction finance, funding applications for payment and staged certificates, which standard providers usually will not touch.
  • Bad debt protection, added to any of the above so a customer insolvency does not become your problem.

Key features

  • Factoring and discounting, disclosed or confidential
  • Advance rates commonly 80 to 90% of invoice value
  • Funding usually available within 24 hours of raising an invoice
  • Facility grows automatically with your turnover
  • Integration with Xero, QuickBooks, Sage and other accounting platforms
  • Optional credit control and bad debt protection

How to get invoice finance with Sadi's Commercial Finance

  1. Speak to a specialist. Tell us about your customers, your credit terms and how much is tied up in unpaid invoices. We respond the same working day.
  2. Share your invoice book. An aged debtor report shows how much is outstanding and how spread out your debtors are, which is what determines the funding available.
  3. Choose factoring or discounting. We help you decide whether to keep credit control in house or hand it over.
  4. Get matched with a provider. We compare advance rates, fees, service quality and contract terms across our panel.
  5. Underwriting and setup. The provider reviews the ledger and issues documentation. New facilities typically go live in two to four weeks.
  6. Funds advanced. A percentage of each invoice is released soon after you raise it, with the balance paid on settlement.

What lenders assess

Because the funding is secured on your debtor book, the provider looks at the book before it looks at you. That means the creditworthiness of your customers, how concentrated the ledger is on one or two accounts, your average debtor days, the level of credit notes and disputes, and whether the work is properly evidenced by contracts, purchase orders, timesheets or proof of delivery.

They will also look at the business itself: filed accounts, management figures, any HMRC arrears, existing charges on the company and the directors' track record. Clean documentation is the single biggest factor you control. Providers advance more, faster, against a ledger where every invoice has a matching purchase order and signed delivery note.

What it costs

There are normally two charges. A discount margin is charged on the funds you actually draw and works like interest, quoted as a margin over base rate. A service fee is charged as a small percentage of turnover and covers running the facility, including credit control on a factoring arrangement. Managed facilities cost more because the provider is doing work you would otherwise do.

The things to check are minimum monthly fees, which bite if turnover dips, the notice period, and any termination charge. Those are where a facility that looked cheap becomes expensive. Our broker fee is disclosed in writing before you commit, and we compare facilities on total annual cost rather than the headline rate.

How long it takes

A new facility usually takes two to four weeks from application to going live, covering underwriting, a survey of the ledger on larger facilities, and legal documentation. Once running, funding against a new invoice is normally available within 24 hours. If you are switching from an existing provider, the notice period on your current agreement is usually the longest part of the timeline.

Case study

A recruitment agency unlocked £80k from outstanding invoices, improving cash flow and avoiding overdraft reliance.

Invoice finance compared with the alternatives

An overdraft is a fixed limit that does not grow with the business and can be withdrawn at short notice. A business loan gives you a lump sum you repay whether or not your customers have paid. Invoice finance is different in kind: it converts work you have already done into cash now, so the funding line expands exactly when you need it most, which is when sales are rising.

It is not the answer for every business. If you sell to consumers, invoice on payment up front, or have very few large customers, other options usually fit better. We will say so rather than push you into a facility that does not suit.

Why use a broker

The invoice finance market has dozens of providers whose pricing looks similar until you read the minimum fees, the concentration limits and the termination clause. Appetite also varies by sector: construction, recruitment and international debtors are all specialist areas where the wrong provider will simply decline. We compare providers on advance rates, fees and service, help you choose between factoring and discounting, and tell you where the real cost sits.

We are registered with the NACFB and FIBA, and we are paid to find the right facility rather than to place a particular provider.

Frequently asked questions

What is the difference between factoring and discounting?

With factoring the provider manages your credit control and collects from your customers. With discounting you keep collecting payments yourself, often confidentially, so customers do not know a facility is in place.

Will my customers know I use invoice finance?

With confidential facilities, no. Collections continue in your name. With factoring, the provider collects and customers are aware, which many businesses prefer because it removes credit control from their workload.

How much of each invoice is advanced?

Typically 80 to 90% upfront, with the remainder paid on settlement less charges. The exact rate depends on your sector, your ledger quality and the provider.

Can a new business get invoice finance?

Often yes. Because the funding follows the invoice rather than your trading record, start up facilities are common, particularly in recruitment. Factoring is usually easier to obtain than confidential discounting at that stage.

What happens if a customer never pays?

Under a standard recourse facility the invoice is recharged to you after an agreed period, usually 90 or 120 days. Bad debt protection can be added so the provider carries the risk of customer insolvency, at extra cost.

What if one customer is most of my turnover?

Facilities are still available, normally with a concentration limit capping how much funding can come from a single debtor. Selective invoice finance is another route where you only want to fund particular accounts.

Does invoice finance affect my ability to borrow elsewhere?

The provider takes a charge over the sales ledger, which means other lenders cannot lend against the same asset. It usually leaves property and asset backed borrowing unaffected, but tell us about any existing facilities early.

Can I fund invoices to overseas customers?

Yes, through export factoring or invoice discounting with credit insurance. Fewer providers offer it and pricing reflects the extra collection risk, so lender choice matters more than usual.

Related guides

Speak to us about invoice finance

Send us your turnover and an aged debtor summary and we will tell you what funding your ledger supports and what it should cost. We respond the same working day. Contact Sadi's Commercial Finance.