Invoice Factoring Finance for UK Businesses

Access funds from eligible unpaid invoices while a factoring provider helps manage customer payments.

If your business supplies goods or services on credit terms, you may have wages, suppliers and other costs to cover before customers pay. Invoice factoring can help bridge that gap by bringing forward access to part of the money owed to you.

Ethos can introduce eligible businesses to invoice finance providers and explain how the available facilities would work.

Discuss invoice factoring

How Invoice Factoring Works

Once a facility is agreed, eligible invoices can support ongoing access to working capital.

1. Raise and Submit Your Invoice

Supply your customer with the agreed goods or services, then raise an invoice. Submit the invoice details to your factoring provider in line with the facility’s requirements.

2. Access an Agreed Advance

The provider makes an agreed proportion of the eligible invoice value available to your business. The amount depends on the advance rate, funding limits and any deductions or reserves.

3. Customer Payment and Remaining Balance

The provider manages collection of the customer’s payment. Once payment is received, the remaining balance becomes available, less the advance already provided and applicable fees or adjustments.

Factoring brings forward access to money from your invoices. It does not increase the amount your customer owes or create additional sales income.

A Simple Illustration

For an eligible invoice of £10,000, an illustrative 80% advance would make £8,000 available initially.

When the customer pays the full invoice, the remaining £2,000 would be released, less applicable fees and adjustments.

This example explains the process only. It is not a quotation or an indication of the advance rate your business would receive.

Could Invoice Factoring Suit Your Business?

Factoring is generally designed for businesses that supply other businesses on credit terms and can demonstrate a clear record of invoices and customer payments.

It may be worth exploring if:

You regularly wait for business customers to pay after delivering goods or services.
You need working capital to cover expenditure during that waiting period.
You would value support with chasing and collecting invoice payments.

For example, a transport business invoicing corporate customers may have a funding gap between paying its operating costs and receiving payment for completed work.

If customers normally pay immediately by cash or card, there may be little eligible invoice debt to fund. The starting point is how your business invoices customers and gets paid.

What Will a Provider Assess?

The total value of your unpaid invoices is only the starting point. A provider will also examine the quality of those invoices and the customers responsible for paying them.

Your invoices
Their value, age, payment terms and whether the goods or services have been delivered. Disputed or significantly overdue invoices may be excluded.

Your customers
Their payment history and creditworthiness, including how much of your outstanding invoice balance is owed by individual customers.

Your business and funding requirement
Your trading history, financial records, existing finance arrangements and the amount of working capital you need.

Available funding can change as invoices are raised, paid or become ineligible. We’ll explain the proposed limits and conditions so you understand how the facility would operate.

What to Consider Before Agreeing a Facility

Fees and funding charges
Check the service fee for managing the facility and collections, together with the charge for using the funding. Ask about minimum charges and any additional fees.

Customer communication
Understand how the provider will introduce itself, contact customers and handle payment queries. Agree how disputes will be passed back to your business.

Unpaid invoices
You may remain responsible for repaying an advance if your customer fails to pay. Any bad debt protection has its own conditions, limits and exclusions.

Contract terms
Check the agreement length, notice period, termination charges, reporting requirements and any security or guarantees.

Compare the likely cost with the cash-flow benefit and collection support your business expects to receive.

How Ethos Helps You Explore Invoice Factoring

We’ll discuss how your business trades, who you invoice and where the funding gap arises before exploring options with invoice finance providers.

If a facility is proposed, we’ll explain the advance rate, fees, collection arrangements and key conditions. We can also help coordinate the application and the information requested by the provider.

What to Have Ready

Your approximate annual turnover and usual customer payment terms.
The total amount currently owed by customers.
An aged debtor report, if available—showing outstanding invoices and how long they have been unpaid.
Details of your main customers and any disputed or overdue invoices.
The funding you need and what it would support.
Details of existing business borrowing or invoice finance facilities.

You don’t need every document before contacting us. Share what you know, and we’ll explain what else may be needed.

Invoice Factoring FAQs

Usually, yes. The factoring provider normally manages collections, and customers will receive instructions about where to make payment. Ask how the provider will communicate with your customers before agreeing to the facility.

Both can provide funding against eligible unpaid invoices. With factoring, the provider normally manages collections. With invoice discounting, your business generally retains responsibility for collecting payment, and the arrangement may be confidential.

This depends on the facility. Some agreements cover an agreed sales ledger, while selective arrangements may cover particular customers or invoices. Explain whether you need ongoing funding or support with specific invoices so the available structures can be explored.

Setting up a facility involves checks on your business, invoices and customers. Once it is operating, funding against eligible invoices follows the provider’s agreed submission and approval process. Tell us about any deadline when you enquire.

It may be possible, but existing lenders’ security and agreement terms need to be considered. Provide details of your current facilities so any overlap can be identified.

Could Your Unpaid Invoices Support Your Cash Flow?

Tell us how your business invoices customers, how long you typically wait for payment and the funding you need.

Our team will discuss your requirements and explain the next steps towards exploring an invoice factoring facility.

Call 01423 608666 or send us an enquiry.

Discuss invoice factoring

Why Businesses Choose Ethos

Ethos is an independently owned Asset Finance company which operates across the UK.

Asset Finance

Asset Refinancing

Commercial Funding

Invoice Factoring

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Invoice Factoring Finance for UK Businesses

How Invoice Factoring Works

1. Raise and Submit Your Invoice

2. Access an Agreed Advance

3. Customer Payment and Remaining Balance

A Simple Illustration

Could Invoice Factoring Suit Your Business?

What Will a Provider Assess?

What to Consider Before Agreeing a Facility

How Ethos Helps You Explore Invoice Factoring

What to Have Ready

Invoice Factoring FAQs

Will my customers know I’m using factoring?

How is factoring different from invoice discounting?

Do I have to include every invoice?

How quickly can I access funding?

Can I use factoring alongside other business finance?

Could Your Unpaid Invoices Support Your Cash Flow?

Why Businesses Choose Ethos

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