Facility, within Invoice Finance
Factoring
Factoring is invoice finance with credit control included: the lender collects payment directly from your customer, not you. That real service is why it usually costs more than confidential discounting. It fits businesses without an established in-house collections function, or growing faster than their collections capacity.
Recognition
Growing faster than your credit-control team can keep up
If chasing payment is eating time you don't have, or you don't have an in-house collections function at all, that's usually the signal that factoring, not confidential discounting, is the right version of invoice finance.
Why it happens
Someone has to do the collecting
Every invoice-finance facility needs collections to happen somewhere. Discounting keeps that job with you, invisibly. Factoring hands it to the lender.
Where this fits
One of three versions of Invoice Finance
Factoring sits alongside confidential discounting and selective invoice finance as one of the three ways to structure the same underlying facility. See Invoice Finance for the full picture and how to choose between them.
Specialist insight
Why it costs more than invoice discounting
What the lender takes on under factoring is real work: chasing payment, managing disputes and running a credit-control function. That's why factoring usually costs more per pound advanced. If you already run a competent credit-control function in-house, you're paying for something you don't need. If you don't, the service genuinely earns its cost.
In practice, businesses often assume factoring is the "beginner" option and discounting the "advanced" one that you graduate to once collections are sorted. It's really a service decision, not a maturity ladder. A well-run five-person business with tight credit control can outgrow the need for factoring long before a much larger one does.
Decision helper
What typically fits
- Businesses without an established in-house credit-control function.
- Businesses growing quickly enough that collections capacity hasn't kept pace.
- Businesses comfortable with customers knowing a finance arrangement is in place.
Alternatives and limitations
If your customers would react badly to a third party contacting them for payment, or you already have solid in-house collections, disclosed factoring may cost more than it's worth. Confidential invoice discounting is usually the better starting point in that case. And if you already have a facility in place and need more headroom rather than a different structure, that's a different question: see Credit Lines.
Talk it through
Need another perspective?
You may already know which facility you think fits. The more valuable question is whether it's actually the right structure for what's happening in the business. We'll review the situation before suggesting possible routes. It costs nothing to have that conversation.
Thank you. It's with our team now.
A person reads every enquiry and we'll come back to you with what we think the right next step is. No obligation at any point.
What happens next
- A person on our team reads it. No need to know which facility you want first.
- If we can help, we may introduce you to a provider and tell you who they are.
- No charge and no obligation at any point. You decide whether to go further.
Adam Parker
Founder of Muswell Rose Consulting Ltd, which trades as Established Finance · former Managing Director of Penny, an invoice finance business, working in mortgages, commercial finance and fintech lending since 2010 (career history).
Last reviewed:
Practical questions
Before you get in touch
How long does it take?
It varies by facility, so there isn't one number that fits every case. Some drawdowns against an existing facility complete within a day or two; arranging something new from scratch usually takes longer. We'll give you a realistic timeline once we understand your situation.
What information do I need?
To start, just a description of what’s actually happening in the business. If it progresses, the provider will ask for the usual things: recent accounts, a sense of turnover and trading history, and details of the specific need.