Invoice Finance — eligibility, lenders, and how it works in the UK
Funding advanced against unpaid B2B invoices.
Eligibility guidance only - not financial advice, not a loan offer, not a guarantee of approval. Lendrly is not FCA-authorised and is not a credit broker.
In short
Invoice finance releases working capital tied up in unpaid B2B invoices. The lender advances a percentage of each eligible invoice — typically 70-90% — and releases the balance, minus fees, once the customer pays. It suits UK B2B businesses that invoice on credit terms of 30-120 days and have reasonable debtor quality. The two main forms are invoice factoring, where the lender manages collections, and invoice discounting, which is confidential. Funding can scale from a few thousand pounds to several million as the ledger grows. It is rarely suitable for B2C, cash-sale or heavily disputed ledgers. Final advance rates and pricing are subject to lender underwriting, ledger audit and ongoing performance.
Snapshot
Typical amount
Up to 90% of eligible invoice value; facilities scale from £10k to several million.
Typical speed
Initial setup 1-3 weeks; ongoing draws often same-day.
Security profile
Assignment of receivables; debenture often required; PGs common at SME ticket sizes.
Best fit
B2B SMEs with 30–90 day customer payment terms.
How invoice finance works in plain English
Invoice finance solves a specific problem: the cash gap between completing work and being paid by a customer on credit terms. Instead of waiting 30, 60 or 90 days, the business can draw down a percentage of each invoice almost immediately. The remainder, minus an agreed fee, is released when the customer pays. Some products operate as confidential discounting — customers continue to pay the business directly and are not aware of the facility. Others operate as full factoring, where the lender takes over the credit-control function in addition to advancing funds.
Underwriting focuses on the quality of the debtor book rather than the business's filed accounts alone. Lenders look at customer creditworthiness, concentration risk (one customer accounting for too much of the ledger), invoice dispute rates, contractual terms and the cleanness of the invoicing and collections process. A small business with one strong corporate customer can sometimes access a higher facility than a much larger business with messy contracts and unresolved disputes.
Costs are usually structured as a service fee (a percentage of invoice value) and a discount fee (interest on funds advanced). Pricing varies with volume, concentration, invoice age and how much credit control sits with the lender. Selective or single-invoice finance is also available for businesses that only want to fund specific invoices rather than the whole ledger.
Best-fit business profile
B2B SMEs with 30–90 day customer payment terms.
Core eligibility signals
Most UK lenders in this category look for a combination of the following. Individual lender criteria vary and final approval is subject to lender underwriting.
- Unpaid invoices
- quality debtors
- clean invoice process
- Predominantly B2B sales invoiced on credit terms (typically 30-120 days).
- Reasonable debtor mix — no single customer dominating the ledger.
- Clean invoicing and contracts without significant retention clauses or disputes.
- UK trading entity invoicing UK or international debtors the lender can verify.
Common blockers
Where the following apply, lenders in this category may decline or deprioritise the application.
- B2C revenue
- invoice disputes
- poor debtor quality
- B2C revenue or cash-on-delivery sales — no eligible invoices to advance against.
- Contractual stage-payment or retention-heavy work in construction-style contracts.
- High dispute or credit-note ratio on recent invoices.
- Outstanding HMRC arrears that create lender concern over preferential creditor risk.
What underwriters typically look at
- Quality and credit ratings of the largest debtors in the ledger.
- Concentration risk — percentage of ledger owed by the top one to three customers.
- Dispute and credit-note rates over recent months.
- Length and clarity of customer contracts, including retention clauses.
- Days sales outstanding (DSO) trend.
- Director and company credit profile.
Documents typically requested
Expect to provide most of the following. Individual lenders may ask for more, depending on the size and structure of the facility.
- Aged debtors report and aged creditors report.
- Sample customer contracts or terms of business.
- Last 6-12 months of business bank statements.
- Latest filed accounts and current management accounts.
- Sample invoices and a list of largest debtors.
- Director ID and proof of address.
Watch-outs — cost and regret risk
Honest cautions on this product. None of these are reasons to avoid it automatically — they are the questions to settle before signing. This is educational guidance, not financial advice.
- Headline service fees often hide a stack of add-ons: trust-account fees, audit fees, CHAPS fees, minimum-monthly fees and exit fees. Ask for an all-in cost.
- Termination notice periods can be 3-12 months. Switching invoice-finance providers is harder than switching a term loan.
- Concentration limits cap how much of the facility one customer can drive — a single big-customer business may unlock less than expected.
- Construction-style contracts with retentions, stage payments or 'pay-when-paid' clauses are routinely declined or heavily discounted.
- Factoring means your customers are told and pay the lender — consider the relationship impact before choosing it over confidential discounting.
Plain-English glossary
Key jargon used on this page, defined neutrally.
- Factoring
- Invoice finance where the lender also manages credit control — customers are notified and pay the lender directly.
- Confidential discounting
- Invoice finance where the business keeps credit control and customers continue to pay the business; the facility is invisible to them.
- Advance rate
- The percentage of each eligible invoice the lender will advance up front — typically 70-90%.
- DSO
- Days Sales Outstanding — the average number of days customers take to pay. Lenders watch the trend, not just the level.
- Concentration limit
- A cap on the share of the facility that any single customer can drive — protects the lender against debtor failure.