Last updated: 12 Aug 2026

Invoice factoring

Invoice factoring lets you sell unpaid invoices to a lender for an upfront advance, usually up to 90% of their value within 24 to 48 hours, while the lender collects payment directly from your customers.

  • See what you could raise against your unpaid invoices

  • Get an advance of up to 90% of invoice value

  • Day to day credit control handed to your factoring lender

  • Get dedicated support from our funding specialists

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What is invoice factoring?

Invoice factoring is a type of invoice finance where you sell your unpaid invoices to a lender, known as the factor, who advances you most of their value upfront and then collects payment directly from your customers. Once your customer pays in full, the factor releases the remaining balance to you, minus their fees. It suits businesses that want funding and credit control support together, since handing collections to your factor frees up time your team would otherwise spend chasing customers for payment.

Why use Capitalise for invoice factoring?

  • Access a fast cash injection

    Instead of waiting weeks or months for your invoices to be paid, advance a percentage of their face value within as little as 24 hours.

  • Outsource credit control to free up time

    Your factoring lender takes on chasing payment, so your team can spend less time on collections and more time running the business.

  • Reduce the risk of late payments

    Invoice factoring providers are experts in credit control, so they can help to ensure your customers do not pay their invoices late.

  • Funding that grows with your sales

    The more you invoice, the more you can typically raise, so your facility scales with your business.

What types of invoice factoring are available?

The right type of invoice factoring depends on how much of your sales ledger you want to finance and who carries the risk if a customer does not pay.

Type

What it means

Whole turnover factoring

You factor your entire sales ledger on an ongoing basis, giving continuous access to funding as you invoice

Spot factoring

A one off facility to factor a single invoice, with no ongoing contract, suited to an occasional cash flow gap

Recourse factoring

Your business remains responsible if a customer doesn't pay, usually at a lower service charge

Non recourse factoring

Bad debt protection is built in, so your factor absorbs the loss if a customer becomes insolvent, usually for a higher fee

Disclosed factoring

The standard approach, where your customers know a factor is collecting payment on your behalf

Confidential factoring

Offered by a smaller number of lenders on our panel, your factor collects payment without your customers being told

If keeping credit control in house and financing confidentially matters more to you than outsourcing collections, invoice discounting may be a better fit.

How does invoice factoring work?

  • 1

    You deliver the work and raise the invoice

    • Your business supplies the goods or service to a customer.

    • You send the invoice to your customer, as usual.

  • 2

    You submit a copy of the invoice

    • Once you generate invoices for your customers, you submit them to your selected invoice factoring provider for processing. This may be all the invoices in your debtor book, or only a portion of them, depending on your specific agreement with the factoring company.

    • This can often be done automatically if your accounting software is connected.

  • 3

    Get your advance payment as a percentage of the invoice value

    • The invoice factoring company will advance a percentage of the invoices total value, typically this is 90%.

    • This enables your business to maintain cash flow without waiting for customer payments.

  • 4

    Your factor collects payment directly from your customer

    • The responsibility of invoice collection is transferred to the factoring company.

    • This offloads the burden of chasing payments from you, freeing up your time to concentrate on your core business functions.

  • 5

    Your factor releases the remaining balance, minus their fees.

    • Once the invoice is settled in full, you receive what is left after the discount rate and service charge have been deducted.

  • 6

    Ongoing access to finance

    • As your customers pay off their invoices, the funds are used to pay down your advance, making new financing available under the same arrangement.

    • This cycle ensures a continuous flow of capital based on your outstanding receivables.

Invoice factoring vs invoice discounting: what's the difference?

The main difference between invoice factoring and invoice discounting is who deals with your customers day to day.

Feature

Invoice factoring

Invoice discounting

Who collects payment

Your factor, directly from your customers

You, keeping your own credit control

Confidential from customers

Usually no, factoring is disclosed

Usually yes, discounting is confidential

Credit control support

Included as part of the facility

Stays with your business

Typical service charge

Around 0.5% to 3% of invoice value or turnover

Around 0.1% to 0.5% of turnover

Best suited to

Businesses that want funding and credit control support together

Businesses with an established credit control process

Both options release a similar advance rate and speed of funding, so the choice usually comes down to whether you would rather keep credit control in house or hand it to your lender.

How do I apply for invoice factoring with Capitalise?

  • Green circle with a white number "1" in the center.

    Tell us about your business

    We'll ask about your turnover, your customers and how much you typically have outstanding on unpaid invoices.

  • Green circle with white number "2" in the center.

    Get matched with lenders

    Your application is matched against invoice factoring lenders from our panel who fit your business profile.

  • Green circle with the white number 3 in the center.

    Speak to a funding specialist

    A dedicated specialist talks you through recourse, non recourse, whole turnover and spot options, so you choose the facility that fits how you work.

  • White number 4 on a solid green oval background.

    Lenders review your application

    Your funding specialist sends your application to multiple matched lenders, who assess your invoices and customers before making an offer.

  • White number 5 centered on a green circular background.

    Accept an offer and draw down funds

    Once approved, your first advance can reach your account within 24 hours.

Am I eligible for invoice factoring?

Most lenders on the Capitalise panel assess your business against the following:

  • Your business trades B2B, invoicing other businesses rather than consumers

  • You have some trading history, though minimum requirements vary by lender

  • Your customers typically pay within 30 to 90 days of invoicing

  • You are willing to transfer day to day credit control to your factoring lender

  • Your business and its customers show a reasonably healthy credit history

What documents do you need to apply for invoice factoring?

Typically, you'll need these documents to apply:

  • Your aged debtor report or sales ledger, showing outstanding invoices and their due dates

  • 6 months of business bank statements

  • Your latest set of filed annual accounts, if available

  • Details of your main customers, including how long you have worked with them

  • Proof of ID for each business director

What are the advantages and disadvantages of invoice factoring?

  • Advantages

    • You get most of an invoice's value upfront instead of waiting 30, 60 or 90 days for your customer to pay.

    • Your factoring company takes on chasing payment, freeing up time your team would otherwise spend on collections.

    • Your invoices themselves secure the funding, so you don't need to put up other business or personal assets.

    • The factoring company weighs your customers' creditworthiness alongside your own, so a strong sales ledger can carry an application further than your credit score alone.

  • Disadvantages

    • Service charges and discount rates make invoice factoring costlier overall than a standard term loan for some businesses.

    • With factoring, your customers deal with your factoring company directly, so it's worth telling them in advance how the arrangement works.

    • Your factor assesses the creditworthiness of the businesses you invoice, so a customer with a poor payment history can affect what you're offered.

    • Invoices that are disputed, very old, or owed by a connected company are often excluded from what a factor will fund.

Invoice factoring vs a business loan

Invoice factoring ties your funding to your sales ledger, so the amount you can raise grows as your invoicing does, and approval leans on your customers' creditworthiness as much as your own. A business loan gives you a fixed lump sum to use however you need, but approval usually depends more heavily on your own credit profile and trading history. If chasing payment is the real issue behind your cash flow gap rather than needing funding itself, our credit control management tools can help you get paid faster, alongside or instead of factoring your invoices.

Which businesses use invoice factoring?

  • Recruitment and staffing agencies

    Cover payroll between placing a candidate and getting paid by the client, often on 30 to 60 day terms.

  • Manufacturers and wholesalers

    Free up cash tied up in stock and materials while waiting for retailers or distributors to settle invoices.

  • Logistics and haulage businesses

    Bridge the gap between paying for fuel and drivers upfront and getting paid by clients further down the supply chain.

  • Construction subcontractors

    Keep projects moving without waiting on the longer payment cycles common on larger contracts.

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