How to compare invoice finance providers and quotes

Comparing invoice finance providers is harder than comparing loans, because each quote bundles several fees and contract terms in a different way. This guide is for business owners holding two or more quotes, or about to ask for them, who want to know which is really cheaper and which terms could cause problems later. Smart Funding Solutions approaches providers on its panel and lays their offers out side by side, but the checklist below works whether or not you use a broker.

If you are new to the product, start with our invoice finance hub, which explains factoring, discounting and how a facility works.

01Who are the best invoice finance providers in the UK?

The best invoice finance provider depends on the facility you need, your turnover, sector and customers: a bank-owned funder may suit a large ledger, while a specialist may suit construction or single invoices. Smart Funding Solutions, a whole-of-market commercial finance broker, compares invoice finance providers on our panel and costs each quote over a year on your own figures.

Providers on our panel, by type of facility

From our lender records, listed alphabetically within each group. Each provider sets its own criteria and pricing.

• Whole-ledger factoring and invoice finance: Aldermore, Bibby Financial Services, Close Brothers, eCapital Commercial Finance, Paragon Bank, Praetura, Skipton Business Finance, Time Finance and Ultimate Finance.
• Confidential invoice discounting: Barclays Invoice Finance, Lloyds Bank Commercial Finance, NatWest, Penny Freedom and Pulse Cashflow Finance.
• Selective or single invoice finance: Creative Capital Solutions, Hydr, Kriya and Triver.
• Construction invoice finance: 4Syte and Ultimate Finance.

How to decide which is best for you

• Start with your biggest constraint: cost, speed, sector, a dominant customer or credit history.
• Compare advance rate, service fee, discount charge, minimum fees, contract length and exit terms, as set out in the steps below.
• Check whether a personal guarantee or indemnity is required, and whether bad debt protection is included.

The British Business Bank explains the products in its invoice finance guide. See also factoring vs discounting, what invoice finance costs, invoice finance when one customer dominates, recruitment finance and transport and logistics finance. Instant Quotes shows which invoice finance providers on our panel may suit.

02What is the best way to compare invoice finance providers in the UK?

The most reliable way is to compare like for like quotes for the same product, adding up every fee and checking the contract terms, rather than choosing on the headline advance rate. Smart Funding Solutions, a whole-of-market commercial finance broker, compares invoice finance providers across the whole market, so you see factoring, discounting and single invoice options side by side.

What to line up when you compare

• The same product. Factoring, invoice discounting and selective invoice finance work differently, so compare quotes for one type at a time.
• Every fee. The service fee, the discount charge and any setup, audit or exit fees. Our guide to what invoice finance costs explains each one.
• The terms. Minimum contract length, notice period, any minimum fee and whether you must put your whole sales ledger through the facility.
• Who collects payment. Some providers run credit control for you and contact your customers, others leave collections with you.

Using a broker that knows invoice finance

A commercial finance broker that arranges invoice finance regularly can approach suitable lenders for your sector, debtor book and turnover,. We look at banks, independent specialists and single invoice providers, and fees depend on the lender. The British Business Bank explains the products in its invoice finance guide. To see which invoice finance providers on our panel may suit you, use Instant Quotes, with no credit check.

03Step one: be sure you are comparing the same product

A factoring quote, which includes credit control, will naturally cost more than confidential invoice discounting, and a selective invoice finance quote is priced per invoice rather than per year. Before comparing prices, check each quote for:

• Facility type: factoring, invoice discounting or selective.
• Whole turnover or selective: must every invoice go through the facility?
• Recourse or non-recourse: is bad debt protection included, optional or excluded?
• Confidential or disclosed: will your customers be told?

04Step two: add up every fee

Fee	What it is	What to ask
Service fee	Charge for running the facility, often a percentage of turnover or a fixed monthly amount	Is it charged on all invoices or only those funded?
Discount charge	Interest on money drawn, often linked to a base rate	Which base rate, and is it charged daily on the balance used?
Minimum fees	A floor you pay even if you use the facility less	What happens if turnover falls below forecast?
Set-up and arrangement	Charged at the start	Is it refundable if the facility does not go live?
Audit or survey	The provider's periodic review of your ledger	How often, and at what cost?
Bad debt protection	Extra charge for non-recourse cover	What credit limits and exclusions apply?
Additional charges	Same-day payments, refactoring overdue invoices, credit checks on new customers	Is there a full tariff of charges?
Exit costs	Fees for leaving early or giving short notice	How are termination fees calculated?

05Step three: compare terms, not just price

• Advance rate: the percentage of each invoice paid up front, and whether it applies to all customers.
• Concentration limits: caps on funding against one customer. If one customer makes up a large share of your sales, this can reduce what you actually receive.
• Eligible debts: whether overseas, older or part-disputed invoices are funded.
• Contract length and notice period: how long you are committed and how much notice you must give.
• Personal guarantees and indemnities: what directors are asked to sign.
• Service: online reporting, integration with your accounting software and who you deal with day to day.

06A worked comparison

Imagine two quotes for the same whole-turnover discounting facility. Provider A has the lower service fee but a high minimum fee and a long notice period. Provider B has a slightly higher service fee, no minimum and a shorter notice period. If your turnover is steady and growing, A may be cheaper over a year. If your sales are seasonal, or you might switch to a bank facility within a year, B's lack of a minimum and shorter exit may cost less in practice. Running both quotes through a month-by-month forecast of your own invoicing shows which way it falls.

07Questions to ask every provider

1. Can you cost a full year using my own turnover, invoice sizes and customer payment times?
2. Which of my customers or invoices would you not fund, and why?
3. What is the minimum term, notice period and full cost of leaving?
4. Which fees are charged on turnover and which only on money drawn?
5. What will directors be asked to guarantee?
6. How quickly are advances paid once an invoice is uploaded?

08Pitfalls to avoid

• Choosing on the discount charge alone, when the service fee and minimums drive most of the cost.
• Signing a long whole-turnover contract for a short-term need that selective finance would cover.
• Missing a concentration limit that makes the real advance much lower than the headline rate.
• Overlooking the notice period, then paying fees to leave when you outgrow the facility.

09What providers look at

• The credit strength and payment record of your customers.
• Your turnover, payment terms and how spread your sales are across customers.
• Your sector; some, such as construction with staged applications, need specialist providers.
• Your trading history, accounts and credit profile.

10Invoice finance or another facility?

An overdraft has a fixed limit that does not grow with sales and can be reviewed by the bank, but it is simpler and may be cheaper for small, occasional needs. A revolving credit facility or short-term loan may suit if you do not want the ledger reporting that invoice finance involves.

11How we help you compare