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Release up to 95% of your invoice value while keeping complete control. Your customers continue paying you directly — they'll never know finance is involved. The professional's choice for growth funding.
Invoice discounting is the "invisible" form of invoice finance. You get immediate access to cash tied up in unpaid invoices, but to the outside world, nothing changes. Your customers pay you as normal, your credit team manages collections as usual, and your business relationships remain intact.
Raise invoices as normal. They show YOUR bank details and YOUR contact information. No mention of any finance company.
Upload invoice details to your lender's portal. Within 24 hours, 85-95% of the value lands in your account.
Your credit control team chases payment exactly as before. The customer deals only with you — they have no idea finance is involved.
Customer pays into a 'trust account' (which looks like your account). The remaining balance, minus fees, is released to you.
The secret to confidential invoice discounting is the trust account. This is a bank account set up in a name like "ABC Ltd Client Account" or "ABC Ltd Collections". To your customers, it looks like just another account belonging to your company.
What your customer sees:
Please pay to:
ABC Engineering Ltd
Sort: 12-34-56
Account: 12345678
Reference: INV-2024-0156
No indication of finance arrangement
Both unlock cash from unpaid invoices, but they work very differently. Choosing the right one depends on your business size, credit control capability, and how you want customers to perceive you.
| Feature | Invoice Discounting | Invoice Factoring |
|---|---|---|
| Who chases payments? | You | The lender |
| Customer awareness | None (confidential) | Usually aware |
| Typical advance rate | 85-95% | 70-90% |
| Total cost (% of invoice) | 0.5-1.5% | 1-3% |
| Minimum turnover | £250k-£500k | £50k-£100k |
| Credit control required? | Yes - proven systems | No - lender provides |
| Setup time | 2-4 weeks | 1-2 weeks |
| Bad debt protection | Optional add-on | Often included |
| Customer relationships | Fully maintained | May be affected |
| Best for | Established businesses | Growing businesses |
Invoice discounting costs vary based on turnover, industry, customer quality, and how quickly invoices are paid. Here's a realistic breakdown of the fee structure.
Monthly fee for administration, credit checking, and facility management. Lower than factoring because you're handling collections.
Interest charged on the money advanced, calculated daily from draw-down to payment. Currently around 6-8% per annum.
Credit insurance protecting against customer insolvency. Recommended if you have concentrated customer exposure.
If paid in 45 days:
Compare to factoring: Same invoice would typically cost £2,000-£2,500 (2-2.5%) because you're paying for credit control services.
Invoice discounting isn't for everyone. It works brilliantly for the right businesses, but factoring might be better if you don't meet these criteria.
There are several variations of invoice discounting to suit different needs.
The most popular option. Customers have no knowledge of the arrangement. Payments go to a trust account with your company name.
Customers are notified that invoices are assigned, but you still manage collections. Slightly cheaper rates due to lower risk.
All eligible invoices are included automatically. Better rates and simpler administration. Most cost-effective for regular users.
Choose specific invoices or customers to finance. Higher cost per invoice (0.75-2%) but maximum flexibility for occasional needs.
Includes bad debt protection. If your customer becomes insolvent, you don't have to repay the advance. Higher cost but lower risk.
From lenders accredited by the Asset Based Finance Association. Ensures compliance with industry standards and codes of conduct.
Setting up invoice discounting takes longer than factoring because lenders need confidence in your credit control. Here's what to expect.
Different industries have different needs. Our specialist partners understand sector-specific challenges and can structure facilities accordingly.
Everything you need to know about how invoice discounting works.
Compare invoice discounting facilities from 50+ specialist UK lenders. Free, no-obligation quotes tailored to your business. Most facilities funded within 2-3 weeks.
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