Invoice finance

Invoice finance when one customer dominates your ledger

How invoice finance works when one customer makes up most of your ledger: why limits bite, what providers check and how to raise the amount you can draw.

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In short

Invoice finance is available when one customer makes up most of your sales ledger, but standard facilities cap how much they will fund against any single debtor, so a large share of your invoices can go unfunded. Providers that specialise in concentrated ledgers raise or remove that cap when the main customer is strong, credit insurance covers it, and the contract is clean of set-off, deductions and restrictions on assigning debts.

This page is for businesses whose sales ledger is dominated by one customer, or a very small number: the food producer supplying a single supermarket group, the subcontractor working for one main contractor, the staffing agency placing workers with one NHS trust, the component maker supplying one manufacturer. These businesses often find that invoice finance offers far less than the ledger suggests. As a broker, Smart Funding Solutions arranges finance from around £10,000 to £500,000+, with larger facilities available in suitable cases, and approaches providers on our panel that are comfortable with concentrated ledgers. For how invoice finance works in general, start with our invoice finance hub.

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Why concentration limits exist

An invoice finance provider is repaid by your customers. Spread across fifty debtors, one failure is a manageable loss. Spread across one, the provider's whole exposure rides on a single company's ability and willingness to pay. Most whole-ledger facilities therefore set a concentration limit: the maximum share of the funded ledger that any one debtor can represent. Debts above that share still go through the facility, but the provider will not advance against the excess.

Illustration: how the cap bites

Illustration only, with round hypothetical figures. A business has £400,000 of approved debts, of which £300,000 is owed by one customer. Its facility has a concentration limit set at 40% of the ledger. The provider will count only £160,000 of the main customer's debt, plus the £100,000 owed by everyone else, giving £260,000 of fundable debt before the advance percentage is applied. More than a third of the ledger earns nothing. If the provider agreed a higher limit for that customer, the same ledger would support a much larger facility.

Where concentration is normal

In some sectors one dominant customer is how the business model works, and providers that know those sectors expect it.

Supplying major retailers: invoices are sound but subject to promotional allowances, retrospective rebates and short-delivery deductions, which providers call dilution.
Construction subcontracting: payment follows applications and certification rather than simple invoices, with retentions and contra-charges. Our construction contract funding page covers how lenders treat that.
Recruitment and outsourcing: a large client or a framework with one public body; often low credit risk but strict timesheet and invoice approval rules. See recruitment finance.
Manufacturing for one brand owner: components or private-label goods made to one customer's specification, where rejected batches create credit notes. Our manufacturing finance page covers wider funding for these firms.
Logistics and haulage: dedicated contracts with one shipper or carrier, frequently on self-billing arrangements.

The risk the finance cannot fix

A provider's caution about concentration reflects a real business risk. If the main customer fails, delays payment across the board or ends the contract, your income and your borrowing base fall together, and on a recourse facility you may have to repay advances on unpaid invoices. Credit insurance protects against the customer's insolvency, not against it simply taking its business elsewhere. Think about how you would cope with notice of termination, and treat a facility built on one customer as a reason to diversify, not to avoid it. For long-running payment delays from a dominant customer, our guide to chasing late payments sets out your rights.

Underwriting

What lenders check on the main customer

Credit strength

the debtor's filed accounts, credit rating and insured limit. A public body or a large, well-rated company supports a higher concentration than a mid-sized private firm.

Payment behaviour

how long it actually takes to pay you, against agreed terms. Large companies publish their payment performance, which you can check on GOV.UK.

Dilution history

the value of credit notes, rebates and deductions against invoices over the past year. High dilution means the face value of invoices overstates what will be paid.

Set-off and contra

whether the customer also sells to you, charges you for services, or can deduct penalties from what it owes.

Contract terms

length and notice period of the supply agreement, approval and acceptance steps, retentions and self-billing.

Restrictions on assignment

clauses forbidding you from assigning debts. For most small and medium-sized suppliers these are ineffective under the Business Contract Terms (Assignment of Receivables) Regulations 2018, though the regulations have exceptions, and providers will still read the contract.

Dependency on renewal

what happens to the business if the contract ends, and how much notice it would get.

Checklist

Documents you will need

Aged debtor list showing the main customer's balance and age profile
The supply contract or framework agreement, including payment, retention and termination clauses
Twelve months of credit notes, rebates and deductions against the main customer
Remittance advices or self-billing statements showing what was actually paid against each invoice
Any credit insurance policy and the limit on the main customer
Latest filed accounts, management accounts and bank statements
A note of plans to win other customers, if you have them

Side by side

Compare your options

How the main business finance structures work. Lenders set their own terms, so treat this as a guide to the questions to ask.

Option	How you repay	Security	Often used for
Unsecured business loan	Fixed instalments, usually monthly	No charge over assets; a personal guarantee is usually required	Growth, stock, tax bills and cash flow
Secured business loan	Fixed instalments, often over a longer term	A charge over property or other assets	Larger sums, property and refinancing
Revolving credit facility	Interest on what you draw; repay and redraw	Varies by lender and case	Recurring or uneven cash flow gaps
Merchant cash advance	A share of future card takings	No charge over assets	Card-taking businesses with uneven months
Asset finance	Regular payments over the life of the asset	The asset being financed	Equipment, vehicles and machinery
Invoice finance	Settled as customers pay their invoices	Your unpaid invoices	Businesses waiting on customer payment

General information only. Every lender has its own criteria, and all finance is subject to status.

Ways to get more funding from a concentrated ledger

Approach	When it helps	Trade-off
Negotiate a higher limit on the named debtor	The customer is strong and pays reliably	Only some providers will do it; terms may be reviewed often
Credit insurance on the main customer	The insurer will cover the debtor for a meaningful limit	Premium cost; cover can be reduced if the customer's rating falls
Single-debtor or contract-specific facility	One contract is the business	Fewer providers; closer monitoring of the contract
Selective invoice finance	You only need funding on certain large invoices	Higher cost per invoice
Asset-based lending	You also have stock, plant or property to add	Larger businesses; more reporting
Customer's own early-payment programme	The customer runs one	Priced on the customer; may conflict with your facility

If your main customer runs an early-payment programme, our guide to supply chain finance explains how it interacts with an existing facility.

How we help

Analyse the ledgerconcentration, dilution and contract terms, so we know what a provider will see.
Test insurancewhether cover is available on the main customer and at what limit.
Approach the right providersthose on our panel that accept concentrated ledgers in your sector, including for overseas customers.
Compare the usable facilitynot just the headline limit but what you can actually draw after concentration caps.
Provider decisionthe provider audits the ledger and contract and makes its own decision.

It is free to enquire; any broker fee is disclosed separately before you proceed.

FAQs

Questions clients ask

Is my existing facility allowed to change my concentration limit?

Usually yes. Most agreements let the provider set or vary concentration limits, often at review or if a debtor's credit standing changes. Check the facility letter for how much notice they must give, because a sudden reduction can cut the cash available against invoices you have already raised.

Will a provider fund a ledger with only one customer?

Some will, typically where the customer is a public body or a large, well-rated company, the contract has a meaningful term, and credit insurance is available. Expect closer monitoring, including regular checks with the customer that invoices are approved.

Does my customer have to agree to invoice finance?

Generally not, and contract clauses banning assignment are usually ineffective for smaller suppliers. Your customer will, however, be asked to pay into an account the provider controls on a disclosed facility, and on a confidential one the provider may still verify invoices discreetly. A good relationship with the customer's accounts payable team makes the facility run more smoothly.

What happens to my facility if my main customer pays late?

If your main customer pays late, your available funding usually falls, because debts past an agreed age become ineligible and the provider stops advancing against them. With a concentrated ledger, one slow payer can remove a large part of your availability at once. Agree realistic ageing limits for that customer when the facility is set up, and keep a cash buffer for periods when payments slip.

Can a recruitment agency with one main client get invoice finance?

Yes, recruitment agencies with one dominant client can often get invoice finance, particularly where the client is a large company or public body with a good payment record. Providers will check the contract terms, how timesheets are approved and how quickly invoices are paid. Expect a concentration limit to apply unless the provider agrees a higher one for that client. Our page on recruitment finance covers the wider options.

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