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Invoice finance

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  • Release up to 100% of invoice value
  • Low rates from 0.1%
  • Completely free, no obligation service

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What our Nerds say about invoice financing

If outstanding customer invoices are affecting your cash flow, invoice finance may be an option for your business. According to banking trade body UK Finance, as of the end of Q2 2022, its members were providing almost 35,000 businesses with invoice finance and asset based lending. Invoice finance releases a percentage of the value of outstanding invoices quickly – the lender advances an agreed amount, and fees and interest are deducted once the customer has paid in full. So while you won’t get the full amount of the invoice, you will get the cash you need for other parts of your business without waiting weeks or months for customer payment.

Holly Bennett Writer at NerdWallet

How invoice financing works

The order
Create an invoice for your customer, showing how much is owed to your business and when payment is due.
Cash advance
Send a copy of the invoice to a lender to release up to 100% of its value as a cash sum.
When it is due, the lender receives the payment from the customer. The lender then sends your business any remaining amount on the invoice that wasn't originally financed, after deducting the prearranged fees.

This comparison service is provided by Touch Financial. Touch Financial is a finance broker, not a lender. Not all products offered by Touch Financial are regulated by the Financial Conduct Authority. They compare invoice financing services from a range of different lenders, aiming to find the one that best suits the needs of their business customers. Touch Financial consultants look at the profile of each business, including cash flow, accountancy needs, and any other specific requirements, to match them with the most appropriate invoice finance provider and product. Touch Financial is authorised and regulated by the Financial Conduct Authority (FRN:727220).

Our guide to invoice financing

What is invoice finance?

Invoice finance is a type of loan that lets your business borrow money against pending customer invoices. The lender advances a percentage of the value of the invoices, sometimes within just 24 hours, and charges a service fee and interest.

There are few types of invoice financing. Each releases cash from invoices, but they operate slightly differently. The most common types are invoice discounting, factoring and selective invoice finance.

You can use a specialist invoice financing company, bank or other financial institution for invoice finance, or a broker. There are also marketplace fintechs where you sell your invoices to investors via an online platform.

How does invoice finance work?

While the process depends on the type of invoice financing you’re using, generally:

  1. The business sends sales invoices to its customers and a copy to the finance provider.
  2. The provider pays an agreed percentage of the invoice value, which could be as much as 90% or even the full amount, into the business bank account.
  3. Depending on the agreement, the business or the provider sends reminders and correspondence about payment to the customer.
  4. Once the customer pays the full invoice amount, the provider releases the remaining amount, with their fees and charges deducted.

The loan isn't repaid until the original invoice has been settled by the customer.

Is invoice finance right for my business?

If late payment of invoices is affecting your cash flow, invoice financing could be an option. That’s because it can free up working capital sooner than waiting for customers to pay.

Invoice finance is open to many sectors and industries, but there are some eligibility requirements.

The lender will usually ask that your business:

  • invoices business customers, not consumers
  • meets minimum turnover requirements
  • is a sole trader, limited company or limited liability partnership
  • sells on usual credit terms of 30 to 90 days
  • can show evidence of a trading history

Not all lenders ask that your business meets all these requirements, and rates and the application process varies. An invoice finance broker can help streamline the process by comparing a number of lenders that fit your criteria on your behalf.

Types of invoice finance

It’s not only important to weigh up whether invoice finance is the right fit for your business, but which type of invoice finance might be most appropriate.

Invoice discounting

If your business uses invoice discounting, you, not the lender, maintains control of your sales ledger and the collection of customer payments. This means the agreement will remain confidential and shouldn’t affect client relationships, but can be more time-consuming than other forms of invoice finance.

Due to the retention of control, invoice discounting is usually available to more established businesses, or ones with a higher turnover.


Invoice factoring is a whole package of services, which involves outsourcing the collection of invoices to the factoring company. This means your customers will be aware of the arrangement, as the factoring company will be dealing with them directly about payments.

Even so, arrangements can be flexible. It’s possible to get confidential invoice factoring, where the provider manages the credit control, but uses your business branding. That way, the customer isn’t aware of the arrangement.

Since the lender takes control of invoice factoring, it is more likely to be available for companies with a limited trading history, or smaller turnover, than invoice discounting.

Selective invoice finance

Selective invoice factoring, sometimes called spot factoring, is where you choose which specific invoices or customer account you want to finance. This means it’s a more flexible option if you’re not looking to outsource your whole sales ledger and want to take a more ad-hoc approach.

If you do this for multiple invoices, it may be more cost-effective to use factoring or discounting. And if you’re a new business with a limited trading history, it may be easier to get other types of invoice finance.

Recourse and non-recourse invoice finance

Invoice factoring with recourse means your business is liable for your customer’s debts. If the lender can’t collect payment, your business will be liable to refund the cash advance for that invoice and effectively buy it back. This may mean you get higher initial cash advances from the lender, as the risk is on you to feel confident your customers will pay up on time.

Non-recourse factoring means the factoring company takes on the risk and responsibility of customers’ debts if they fail to pay. It may also be referred to as bad debt protection, or invoice insurance. This option is likely to cost you more, and the lender will want to be sure your business can show an extensive history of prompt customer payment.

Bear in mind there may be exceptions to what is covered by the non-recourse agreement, so read the small print carefully. For example, it may only apply if the customer becomes insolvent, or you may not be covered if the customer has grounds to dispute the invoice.

What businesses use invoice finance?

Any business that relies on customer invoices may be able to benefit from using invoice finance. Just a small selection of businesses that could use invoice finance includes:

  • accountancy firms
  • recruitment companies
  • construction companies
  • architects
  • advertising firms
  • publishers
  • professional services firms
  • security companies

Benefits and risks of invoice finance

To decide if invoice finance would suit your business, make sure you’ve considered the pros and cons.

Advantages of invoice financing

Some of the benefits of invoice financing include:

Quick access to working capital.

Instead of waiting for weeks or months for customer payment, an agreed percentage of the invoice could be in your business bank account as soon as 24 hours after issuing it, once the agreement is set up.

No fixed assets are needed.

There is usually no need to offer assets as security for the loan. This might be helpful if your business has few fixed, physical assets.

As your business grows, so does the amount you can borrow.

The availability of finance is based on the value and quantity of your invoices. So as your revenue increases, so does the amount of funding you can access.

It may be easier to get than other types of business loan.

Your business credit history is considered, but the focus may be more on the creditworthiness of your customers and the value of the invoices, than issues such as a limited operating history.

It can save you time.

Some invoice financing options include complete outsourcing of your sales ledger, so you can spend the time on other areas of the business. The provider may automatically update you about payments and fees against each invoice through online accounting software.

Disadvantages of invoice financing

Before applying for invoice finance, you should make sure you consider that:

You won’t receive the full value of the invoice.

The lender will deduct fees and interest. And if you want to end the agreement early, you may be charged a termination fee, or be expected to give a notice period.

The provider will usually carry out credit checks when you apply.

This could affect your credit report. And depending on your agreement, if your customer doesn’t pay their invoice, the lender may hold you personally liable – this is known as recourse factoring. With non-recourse financing, the lender accepts the liability of your customer not paying.

It may cost more than other types of business borrowing.

Factoring fees may be higher than traditional business loans. You should compare a few providers to find the best value agreement for you.

Your customer may know you’re financing their invoices.

If the provider manages customer payments, your customers may be aware of the arrangement. It’s possible to keep this in-house, if you would rather keep it confidential, with invoice discounting.

How much does invoice finance cost?

Invoice financing isn’t a free service and charges vary between providers. What you pay may depend on a number of factors, such as:

  • your sector and trading history
  • the value and volume of your invoices
  • how long your customers take to pay.

You’ll pay a discount charge for releasing the cash, as a percentage of the invoice value. You’ll also pay a service charge, known as a credit management fee, for the arrangement. If you’re outsourcing management of customer accounts and credit control, the service charge will be higher than if you keep everything in-house.

There may also be additional costs, such as a termination fee if you want to end your agreement early, and other charges for putting the facility in place, checking the business finances, overdue fees if customers don’t pay up on time, and credit protection fees. So it’s crucial to read the terms of the agreement carefully, so you’re aware of the actual cost.

While fees are important, you’ll also want to be sure of the quality of service. So take the time to compare your options and check customer feedback. If the lender will be dealing directly with your customers about payment, this may be a key consideration.

How much can I borrow?

How much you are advanced on each invoice depends on the deal you agree with the lender at the outset. When deciding on their charges, a provider will look at factors including:

  • your type of business
  • the creditworthiness and reliability of your customers
  • the number of invoices you expect to process
  • the typical value of your invoices

If you’re looking to finance more than £1 million, other sources of funding, such as business loans, credit cards or overdrafts, may be more suitable for your business.

Invoice financing example

Here’s an example. If 85% of a £50,000 customer invoice is released, your business would receive £42,500 up front.

When your customer pays what they owe in full, the remaining £7,500, minus total charges and fees of 3%, is paid into your business account. That means a total of £48,500 for your business, and £1,500 for the factoring company.

How to apply for invoice financing

You can apply for invoice financing directly with a finance provider, or through a broker. Eligibility checks and applying can usually be done online, with some options to manage your account via an online platform.

The application process and documents required will depend on the lender, your business and the type of financing you’ve chosen. But you’ll usually be asked to provide:

  • a list of your customers and value of outstanding invoices
  • what industry your business operates in
  • your estimated annual turnover
  • financial statements for auditing and checking your business credit report

How long does it take to get invoice financing?

The initial set-up of your invoice financing agreement could take anything from a few hours to a week, depending on the complexity of your business, the provider, and how you apply. Make sure you have all the documentation ready, to avoid delays on your part.

Once everything is in place, you may have funds released from your invoices within 24 to 48 hours.

Can you get invoice finance with bad credit?

If you’re having trouble securing traditional finance for your business due to poor credit, it may be possible to access invoice financing. That’s because lenders tend to focus on the strength of your customers’ credit and payment history, along with the payment terms of the invoice.

Even so, they will usually run business credit checks and sometimes personal credit checks. Working to improve your business credit score is likely to give you access to more, and possibly cheaper, borrowing terms. The lender will still need to confirm that your business isn’t in financial difficulty, and may ask to see for proof, such as bank statements.

» COMPARE: Secured business loans

Alternatives to invoice finance

If you’re looking to boost everyday cash flow in your business, invoice financing isn’t the only option. It depends what you need the funding for, but other types of financing include:

It’s important to research your options carefully and consider affordability before deciding which type of funding is best for your business. Do a cost-benefit analysis before taking out any loan, and be clear about the total interest you would be paying.

You may also want to look at the latest small business grants available for growing businesses.

» MORE: Funding to expand your business

Invoice finance vs asset finance

While sometimes lumped together, invoice finance and asset finance are suitable for different purposes.

With invoice finance, money is borrowed against outstanding invoices. Asset finance, on the other hand, sees you either hire or lease equipment or machinery, or use refinancing to unlock the value of assets you already own.

Since it involves physical assets, if you fail to meet your asset finance payments, you may lose equipment that is vital to the functioning of your business.

What is Touch and what services does it provide?

Founded in 2008 as part of the SFP Group, Touch is an award-winning financial broker that specialises in invoice finance. It also offers brokerage services for business loans and working capital finance.

It is authorised and regulated by the Financial Conduct Authority (FCA).

Invoice Financing FAQs

What is the difference between invoice discounting and factoring?

The main difference between invoice discounting and factoring is that with discounting, you are in charge of chasing your clients for the outstanding invoices, while with factoring the lender takes control of your ledger and will deal with your clients directly.

Is invoice finance risky?

Invoice finance isn’t a regulated activity in the UK, but organisations offering this service may be regulated for other similar services. You can check if your invoice finance provider is listed with the FCA.

Banking trades body UK Finance has an industry-wide code of conduct designed to help give you confidence using this type of finance. The majority of invoice finance providers in the UK are members of UK Finance, and must follow their standards.

Where can I find reviews of Touch?

You’ll find reviews of Touch, and the providers it works with, online. Independent sites can help give you a picture of the service and level of support they offer.

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