Choosing between invoice factoring companies is less about headline rates and more about how the whole facility is built: what is advanced, what is charged, how long you are tied in and who chases your customers. This guide sets out how UK small businesses can compare invoice factoring providers in 2026, what the main charges look like, and how to get a quote that reflects the real cost. For an overview of the service itself, see our invoice factoring and invoice discounting page.
Invoice factoring for small businesses: who qualifies
Invoice factoring is available to most UK limited companies, LLPs and many sole traders that sell to other businesses on credit terms, typically 30 to 90 days. Factoring companies lend against the quality of your customers (the “debtors”) as much as against your own business, which is why newer and smaller firms can often qualify where a bank loan would be declined.
Providers will usually look at:
- Who you invoice. Business customers only. Invoices to consumers are not normally eligible.
- Debtor spread. Heavy reliance on one customer can lead to a concentration limit, often capping any single debtor at a set percentage of the ledger.
- Invoice quality. Completed work or delivered goods, without staged billing, retentions or disputes.
- Turnover. Whole-turnover facilities often start from around £100,000 a year; single invoice factoring can suit smaller or irregular volumes.
- Trading history and existing charges. An existing debenture held by a bank may need a deed of priority or waiver.
How to compare invoice factoring companies in the UK
Factoring companies quote in different ways, so two offers can look similar and cost very different amounts. Compare them on the same basis:
| What to compare | Typical range | Why it matters |
|---|---|---|
| Advance rate | 70–90% of approved invoices | Sets how much cash you receive up front. The balance, less charges, is paid when your customer settles. |
| Service (administration) fee | Often 0.5–3% of invoice value or turnover | Covers ledger management and, for factoring, credit control. Check for any minimum annual fee. |
| Discount (funding) charge | Usually a margin over Bank Rate, charged on funds drawn | Works like interest. Bank Rate is 3.75% (held on 17 September 2026), so ask for the margin and how it is calculated. |
| Contract term and notice | Commonly 12 months plus a notice period | Determines how easily you can leave. Check for early termination and exit fees. |
| Recourse or non-recourse | Recourse is standard; non-recourse costs more | With recourse, you bear the loss if a customer does not pay. Non-recourse adds bad-debt protection. |
| Additional charges | Set-up, audit, same-day payment, refactoring | These can add materially to the real cost. Ask for a full fee schedule. |
Figures are indicative and vary by provider, sector and the quality of the debtor book. They are not an offer of finance.
Invoice factoring rates: working out the real cost
The most useful single figure is the total annual cost of the facility as a percentage of the funds you actually use. To estimate it, add the service fee, the discount charge on the average balance drawn and any fixed fees, then divide by the average amount of funding in use.
Worked example (illustrative): a business invoicing £50,000 a month on 60-day terms has around £100,000 of debtors. At an 85% advance, about £85,000 is available. A 1% service fee on £600,000 annual turnover is £6,000. A discount charge of Bank Rate plus 3% (6.75% a year) on an average £80,000 drawn is about £5,400. Total annual cost is about £11,400, or roughly 14% of the average funds used. This is before any set-up, audit or minimum-fee charges.
Single invoice factoring and selective facilities
Single invoice factoring (sometimes called spot factoring) lets a business fund one invoice or a small group of invoices without committing the whole sales ledger or a 12-month contract. It usually costs more per invoice than a whole-turnover facility, but can suit seasonal businesses, one-off large orders or firms testing invoice finance for the first time.
Factoring versus invoice discounting
With factoring, the provider runs your credit control and your customers pay the factor directly, so the arrangement is usually visible to them. With invoice discounting, you keep control of collections and the facility can be confidential. Discounting generally needs a larger turnover and robust credit control. Our invoice factoring working capital guide compares both with an overdraft.
Getting an invoice factoring quote
To get an accurate quote, have the following ready:
- an aged debtor and aged creditor report;
- your last filed accounts and current management accounts;
- a sample of recent invoices and any customer contracts or terms;
- details of existing lenders and any charges registered at Companies House.
A broker can approach several factoring companies on the same information and present the offers on a like-for-like basis, including the fee schedule and exit terms.
Frequently asked questions
Which invoice factoring companies are best for small businesses?
There is no single best provider. The right factoring company depends on your sector, debtor spread, turnover and whether you need credit control or confidentiality. Compare the advance rate, total cost, contract term and exit fees side by side.
How quickly can a factoring facility be set up?
Once a facility is approved and the debtor ledger is verified, funds against new invoices are typically released within 24–48 hours. Initial set-up, including due diligence, usually takes one to three weeks.
Will my customers know I am using invoice factoring?
Usually yes, because the factor collects payment. Confidential invoice discounting is available to larger businesses that run their own credit control.
Is invoice factoring regulated?
Invoice finance provided to limited companies is generally not regulated by the Financial Conduct Authority. Check the terms carefully and take advice before signing.
Giles Finance is a trading style of Giles Finance & Consultancy Services, which is authorised and regulated by the Financial Conduct Authority (FRN 726857) for regulated mortgage and consumer credit activities. Invoice finance for businesses is not regulated by the Financial Conduct Authority. Figures are illustrative only. Last reviewed: 15 October 2026.