A review of invoice finance lenders 2020 | moneyfacts.co.uk

Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 27/10/2020

Cashflow has always been the lifeblood of any business, but in 2020 this has never been more important due to the impact of Coronavirus on the UK economy and the consistency of trade for businesses.


Invoice finance can help businesses to manage their cashflow by accelerating the speed of receiving funds for their outstanding invoices. This works by a lender agreeing to release to the business a percentage of the value of invoices when they are issued, instead of the business waiting for their customer to pay them. Depending on the type of invoice, either the business or the lender will be responsible for chasing up payment of the invoices. The lender may charge a service fee and interest costs on the amount released to the business. Businesses need to offer trade business-to-business on credit terms to qualify for invoice finance and some lenders have rules on the minimum turnover they will accept.

We review what is available from some of the leading invoice finance lenders in the UK.

 

 

Royal Bank of Scotland (RBS) invoice finance

RBS offers up to 90% of the value of outstanding invoice values within 24 hours of agreeing a lending facility with a business. Businesses using RBS for invoice finance can choose between invoice factoring, where the bank acts as the firm’s credit control and collects the money of unpaid invoices on their behalf, or invoice discounting, where the firm retains responsibility for credit control.
Businesses must have a turnover of at least £250,000 and no greater than £6.5m to be eligible for RBS invoice factoring and a minimum of £300,000 turnover for RBS invoice discounting.
Businesses that sign up for invoice finance from RBS will also get a relationship manager and have 24/7 access to an online invoice finance account. This online account is called FacFlow. FacFlow allows businesses to view their sales ledger, their receivables purchased account and their discounting statements. Business users can also view their payment availability and request new payments.
Businesses that become a customer of RBS can also benefit from Free Agent, a cloud-based business accounting software, for free.


RBS also offers asset-based finance.

Good points

  • Mid-sized to larger businesses.
  • Offers dedicated online account.

Low points

  • Businesses with a turnover of less than £300,000 do not have the option to manage their own credit control.

HSBC invoice finance

HSBC primarily offers an invoice factoring service. This means it prefers to responsible for the credit control of the invoices being used under the service. HSBC can advance up to 90% of a business’s invoice value by the next working day and businesses need to have a projected turnover of at least £500,000 to be eligible. This means the bank will consider start-ups as well as more established businesses. It is not required to be a business bank account holder with HSBC, but the bank states that many businesses find it easier and more cost-effective to do so. HSBC will also accept sole traders and partnerships as well as limited companies for invoice finance.
The bank offers a designated credit controller as part of its invoice factoring service. This means the bank will collect debts on behalf of the business and this includes all customer communication such as chasing letters and phone calls. Businesses with a turnover in excess of £500,000 may be considered for invoice discounting where they can retain responsibility for credit control.
HSBC also offers a credit protection product. This covers the entirety of a first loss on eligible debts if a company either becomes insolvent or cannot pay the invoice after 120 days past the invoice date. The bank also provides businesses using the credit protection product with a free in-house legal service to help follow up on unpaid invoices that are covered by the protection.

Good points

• Start-ups and more mature businesses.
• Includes designated credit controller for invoice factoring.
• Accepts sole traders, partners and limited companies.

Low points

• Businesses with a turnover of less than £500,000 may not have the option to manage their own credit control.

Close Brothers Invoice Finance

Close Brothers offers invoice discounting and factoring and is also an asset-based lender too.
Close Brothers will release up to 90% of the invoice value and businesses must have a turnover of at least £500,000 per annum. The lender also states that businesses must be prepared to finance all of their invoices, not just a selection.
Businesses that use Close Brothers for invoice discounting will retain control of collecting their outstanding invoices. Close Brothers uses a piece of software called Ideal to manage its invoice discounting and it can integrate with more than 285 accounting systems. This system allows for the release of funds in real-time as invoices are raised.
Businesses that use Close Brothers for invoice factoring will transfer responsibility for credit control and collections to the team at Close Brothers.

Good points

• Invoice finance software integrates with more than 285 accounting systems.
• Releases funds in real-time.
• Medium to larger-sized businesses.

Low points

• Businesses must include all their invoices to qualify.

 

Lloyds Bank invoice finance

Lloyds Bank offers invoice factoring to businesses with a turnover of more than £50,000 and invoice discounting to those with more than £250,000 turnover. Businesses do not need to be an existing client of Lloyds Bank to be eligible.
Lloyds Bank is offering a 1% discount margin on all funds released through invoice finance up to March 2021 and it is offering no arrangement fees and no service charge in the first month of using the service.
The bank also offers Debtor Protection to its invoice finance clients, but businesses will also need to have a turnover of more than £200,000 to qualify. This type of cover protects up to 90% of the value of an eligible unpaid invoice. This includes both insolvency of the customer and failure to pay.

Good points

• Available to businesses with a turnover of £50,000.
• 1% discount on all funds release to March 2021.

Low points

• Businesses with a turnover of less than £250,000 may not have the option to manage their own credit control.

Aldermore invoice finance

Aldermore offers invoice finance to businesses with a turnover of more than £250,000. Aldermore can provide up to 90% of the value of invoices and release these usually within 24 hours.
Businesses wanting to use invoice discounting will need an established credit control department. When using invoice discounting, the business is required to chase up the invoices for payment and monies paid go directly to Aldermore. Any money left over after fees is returned to the business.
Businesses can also choose invoice factoring from Aldermore, for example if they do not have a credit control department or this is not well established. In this case, Aldermore will be responsible for chasing up payment of the relevant invoices.
Aldermore also offers bad debt protection to its invoice finance customers. This protects up to 95% (excluding VAT) of the debt outstanding for either selected customers or for all the invoices a business issues. Invoices need to be greater than £500 to be eligible. This protection is available for UK and export customers.
Aldermore may require additional security.

 

Good points

• Mid-sized and larger businesses.
• Option for invoice factoring and discounting available.

Low points

• Additional security may be required in some cases.

Find out more about invoice finance from Aldermore.

Hitachi invoice finance

Hitachi offers invoice factoring for businesses with a turnover of at least £50,000 and invoice discounting for those with a turnover of £250,000. The lender offers a six-month trial period, followed by a revolving six-month contract. It will consider start-up businesses but prefers business owners to be homeowners. The lender also accepts export businesses as well.
Businesses using Hitachi for invoice factoring will pass their responsibility for chasing invoices and credit control of eligible invoices to Hitachi. Hitachi describes the process that on issuance of an invoice it will give the business up to 90% of the invoice value. When the customer pays the full invoice value directly to Hitachi, it will then release the variance back to the business less any service fees.
Hitachi also offers invoice discounting where the business can keep the involvement of a lender with their invoices confidential and the business continues to manage their own credit control.
This lender also offers credit protection for eligible invoices where the customer cannot pay.

Good points

• Available to businesses with a turnover of £50,000.
• Six-month trial period without contract.

Low points

• Businesses with a turnover of less than £250,000 may not have the option to manage their own credit control.

 

Barclays Bank invoice finance

Barclays Bank offers invoice finance through MarketFinance.

 

Ultimate Finance invoice finance

The lender Ultimate Finance can offer up to 95% of the value of unpaid invoices up to a maximum of £5m. Ultimate Finance offers invoice factoring and invoice finance across a range of sectors, including manufacturing, construction, agriculture, transport, retail, telecommunication, technology, engineering, health and food. This lender also offers a confidential service for those businesses that want to keep the lender’s involvement a secret from their customers. This lender requires a debenture to be in place.

Good points

• Up to 95% of invoice value potentially available.
• Confidential service available.

Low points

• Debenture is required.

Find out more about invoice finance from Ultimate Finance.

Satago invoice finance

Satago offers invoice finance for businesses that may want to use it for one or multiple invoices. It can release up to 85% of the value of unpaid invoices. Satago is also a software service to help businesses manage their credit control and it integrates with more than 300 accounting software tools. Businesses can then use this service to select the invoices they want to finance using invoice finance and monitor the money they receive.

Good points

• Option to select the invoices to be used for invoice finance.
• Software service that can integrate with more than 300 accounting software tools.

Low points

• Only up to 85% of invoice value potentially available.

Find out more about invoice finance from Satago.

 

Nucleus invoice finance

Nucleus offers invoice finance from £100,000 up to £50m for the purposes of enhancing cash flow, removing the impact of late payments and the convenience. This lender takes a bespoke approach and will consider each business on its situation and merits.

Find out more about invoice finance from Nucleus.

Things to consider before going ahead with invoice finance

When using invoice finance, businesses are using their debtor book as security and some lenders may require a debenture for this. There may also be cases where a lender requires personal security too such as a personal property. Acceptance for invoice finance is usually subject to status and eligibility.

Disclaimer

Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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