Unlock cash from unpaid invoices, chasing included

Invoice factoring lets you raise cash against unpaid invoices by selling or assigning them to a funding partner, who advances most of the value soon after you raise each invoice. Because this is factoring rather than discounting, the funder also takes over collections and credit control, chasing your customers for payment directly. Your customers are told their invoices have been assigned, so the arrangement is disclosed rather than confidential. When each invoice is settled, you receive the remaining balance less the funder's charges.

In practice you enter a facility that funds your sales ledger on a rolling basis, so as older invoices are paid and new ones are raised, your available funding refreshes automatically. Most facilities advance a large proportion of each invoice up front, releasing the remainder once your customer pays. The funder's credit control team handles statements, reminders and chasing, which lifts the admin of collections off your own team. Some facilities cover your whole sales ledger, while selective options let you factor only chosen customers or individual invoices.

The result is a funding line that moves with your trade rather than a fixed lump sum. It works best when you invoice other businesses on credit terms and the wait for payment is what holds your cash flow back. The exact structure, advance rate and charges all sit with the individual funder and are subject to approval.

Facilities are usually sized to your turnover and the value of your sales ledger rather than set as a fixed loan amount, so the funding available grows as your invoiced sales grow. Advances commonly cover a large share of each invoice up front, with the balance paid over to you once your customer settles. Amounts range widely, often from a few thousand for a modest ledger to several hundred thousand or more for a larger one, but every figure sits with the individual funder and is subject to approval.

Pricing typically has two parts: a service fee for running the facility and managing collections, and a discount or interest charge on the funds advanced while they are outstanding. Whether the facility is recourse or non-recourse also matters. With recourse you remain responsible if a customer ultimately fails to pay, while non-recourse shifts some of that bad-debt risk to the funder, usually at a higher cost. Some facilities carry setup or minimum fees, so it pays to look at the total cost rather than any single headline rate.

Terms and exact structure vary between funders and depend on the size and quality of your ledger, so comparing more than one offer is worth the effort. Because this is funding secured against your invoices, the practical detail of your ledger tends to shape pricing as much as your own accounts do.

Once a facility is set up, factoring is one of the faster forms of business funding to draw on day to day, because cash releases against invoices as you raise them rather than through a fresh application each time. Setting up the facility itself takes a little longer than an unsecured loan, since the funder reviews your sales ledger and verifies invoices before the first advance is released. After onboarding, many businesses see funds against new invoices within a short window of raising them.

Getting an indicative view is quicker still. Comparing options through a marketplace can give you an early sense of likely advance rates and structure shortly after a soft search, with no impact on your credit score. The exact timeline to a live facility depends on the funder, the size and condition of your ledger, and how quickly you can share up-to-date figures and invoices.