Invoice Finance Facility Review: When to Refinance and How to Compare Providers in 2026
If your invoice finance facility was set up more than two years ago, the pricing, advance rates and service levels may no longer reflect the current market. With the Bank of England base rate at 3.75% and a more competitive provider landscape in 2026, reviewing your facility regularly can reduce costs and improve the funding available against your debtor book.
Why a regular facility review matters for SMEs
An invoice finance facility is not a set-and-forget arrangement. Pricing, advance rates and service quality can all drift out of step with what the market offers, particularly if your business has grown or your debtor profile has improved since the facility was set up.
Many SME owners renew by default when their minimum term expires, without benchmarking what other providers would offer. That default renewal can lock in a discount rate, service charge structure or concentration limit that was reasonable two or three years ago but is now above the market rate. A structured annual review prevents that drift and gives you a stronger negotiating position with your existing provider.
How the 3.75% base rate affects your discount charge
The discount charge on most invoice finance facilities is priced as a margin above the Bank of England base rate. With the base rate currently at 3.75% following the December 2025 decision, the all-in discount charge for a typical SME facility sits between 5.75% and 8.25% per annum, depending on turnover, sector risk and debtor quality.
Businesses that set up facilities when the base rate was 0.10% in 2021 will have seen their discount charge rise significantly as rates climbed. If your margin above base has not been renegotiated since that period, you may be paying a margin that no longer reflects your improved credit profile or the greater competition among providers for quality debtor books. Comparing your current margin against live market terms is the starting point for any review.
What to check in your current facility agreement
Before approaching other providers, examine three areas of your existing agreement. First, the minimum service charge: most facilities specify a minimum annual charge regardless of how much you draw down. If your turnover has fallen or become seasonal, you may be paying for headroom you do not use. Second, the concentration limit: this caps the percentage of your ledger that can relate to a single debtor. If a key customer now accounts for a large share of your revenue, a tighter concentration limit restricts your available funding. Third, notice and exit provisions: many agreements require 90 to 180 days written notice to terminate, and some include early exit penalties within a minimum contract period. Knowing these terms before you negotiate protects you from incurring unexpected charges.
Advance rates and debtor eligibility: what good looks like in 2026
Advance rates on commercial invoice finance facilities typically range from 80% to 90% of the face value of eligible invoices. The gap between providers on this figure has narrowed as competition has increased, but eligibility criteria vary considerably. Some providers exclude invoices with payment terms beyond 90 days, invoices raised under construction contracts, or invoices to overseas debtors without export insurance in place.
A facility that excluded certain invoice types when you started may now be leaving a material portion of your ledger unfunded. If your business has added new customer types, entered export markets, or moved into sectors where longer payment terms are standard, checking whether your current facility actually funds those invoices is essential. Providers such as Aldermore, Bibby Financial Services and MarketInvoice offer different eligibility parameters, and a direct comparison can reveal funding gaps you may not have noticed.
High street banks versus specialist providers: how the market has shifted
High street banks including Barclays, NatWest and HSBC have progressively tightened their appetite for SME invoice finance over the past three years. Minimum turnover thresholds have risen, credit teams have become more cautious about sectors such as construction and recruitment, and some branch-level relationship managers no longer have the authority to arrange invoice finance facilities directly. This does not mean bank facilities are unavailable, but it does mean that qualifying criteria are stricter and pricing is not always competitive for smaller ledgers.
Specialist and challenger lenders have filled much of that gap. Aldermore, Bibby, Close Brothers, Skipton Business Finance and MarketInvoice all operate with lower minimum turnover thresholds and faster onboarding processes. The fintech consolidation of 2025 and 2026 has also produced larger, better-capitalised platforms. For SMEs with turnover between £500,000 and £5 million, the specialist market is now materially broader than it was five years ago, and worth benchmarking properly rather than assuming the incumbent bank facility is the only credible option.
How to run a structured provider comparison
A useful comparison covers six data points: the discount rate as an annualised percentage above base; the service charge as a percentage of gross turnover funded; the advance rate on eligible invoices; the concentration limit per debtor; the minimum contract term and exit notice period; and any additional charges such as CHAPS transfer fees, audit fees or credit protection premiums if the facility is on a non-recourse basis.
Gathering these figures from three or four providers and presenting them in a single table makes it straightforward to identify where your current facility is competitive and where it is not. Using an independent broker can accelerate this process, as brokers with panel access can obtain indicative terms simultaneously rather than requiring you to submit separate applications. However, check whether the broker charges a fee or takes a commission from the lender, as both affect the objectivity of the advice.
The switching process: practical steps and common delays
Switching invoice finance provider is more involved than switching a bank account, but it is a routine process that most specialist providers manage regularly. The main practical steps involve giving notice under your existing agreement, agreeing a transition date with your new provider, and ensuring the new provider notifies your debtors of the change in payment instructions if you are moving from confidential to disclosed factoring or vice versa.
The most common delays arise from three sources. First, the existing provider taking the maximum permitted time to release the charge over your debtor book and confirm the final reconciliation balance. Second, delays in obtaining a deed of priority if your existing lender also holds a general debenture over business assets. Third, debtors continuing to pay the old account after notification, which requires prompt redirection and clear communication. Allowing six to eight weeks for a full transfer is realistic for most SMEs, though straightforward cases can complete faster.
When staying with your current provider is the right decision
A facility review does not always result in a switch. There are legitimate reasons to remain with an incumbent provider after benchmarking the market. If your relationship manager has detailed knowledge of your sector, your debtor base includes complex or disputed invoices that require active management, or your current provider offers a combined invoice finance and trade finance facility that would be difficult to replicate, the continuity value may outweigh a modest pricing saving elsewhere.
The key outcome of a review is an informed decision rather than automatic renewal. Even if you stay, presenting competitive terms to your existing provider often produces a margin reduction or an improvement in advance rate without the cost and disruption of switching. Providers with a mature book typically prefer to reprice a retained customer rather than lose the facility entirely to a competitor.
| Provider type | Typical minimum turnover | Advance rate | Discount rate (above base) | Minimum contract term | Confidential option |
|---|---|---|---|---|---|
| High street bank (e.g. HSBC, Barclays) | £1m+ | 80-85% | 2.00-3.50% | 12 months | Yes |
| Challenger bank (e.g. Aldermore) | £250k+ | 85-90% | 2.50-4.00% | 12 months | Yes |
| Independent specialist (e.g. Bibby, Close Brothers) | £100k+ | 85-90% | 2.50-4.50% | 12-24 months | Yes |
| Fintech platform (e.g. MarketInvoice) | £100k+ | 85-90% | 2.50-4.50% | Flexible or 12 months | Yes |
| Selective/spot factoring | No minimum | 80-85% | Fee per invoice (not rate-based) | None | Varies |
Step by step
- Pull your current facility agreement and note the discount rate margin, service charge percentage, concentration limits, advance rate, minimum service charge and the notice period required to terminate.
- Request indicative terms from at least three alternative providers, covering the same six comparison points: discount rate, service charge, advance rate, concentration limit, minimum term and additional fees.
- Build a simple cost comparison table using your last 12 months of funded turnover as the base figure, applying each provider's pricing to calculate total annual cost.
- If a competitor offers materially better terms, present those terms to your existing provider in writing and request a formal counter-proposal before committing to switch.
- If you decide to switch, give written notice to your existing provider on the required date, instruct your new provider to begin onboarding, and prepare debtor notification letters for the transition date.
- After transition, confirm the final reconciliation balance with your outgoing provider and obtain written confirmation that their charge over your debtor book has been released.
Example
A West Midlands electrical contractor with £2.1 million annual turnover had held a factoring facility with a high street bank for four years. Their discount margin was 3.25% above base. Following a structured review, a specialist independent provider offered 2.50% above base, a higher advance rate of 88% and no minimum service charge. The saving over 12 months at the 3.75% base rate was approximately £16,000. The contractor gave 90 days notice and switched within the contract renewal window with no exit penalty.
FAQs
How often should I review my invoice finance facility?
A formal review once a year is a sensible minimum. The most practical time is two to three months before your minimum contract term expires, which gives you enough time to obtain competitive quotes, negotiate with your existing provider and serve notice if you decide to switch. Reviewing more frequently is worthwhile if your turnover, debtor profile or sector has changed materially.
Will approaching other providers affect my credit file or my relationship with my current provider?
Requesting indicative terms from other providers typically involves a soft credit check or no credit check at the initial stage, so it does not affect your credit file. You are not obliged to tell your existing provider you are benchmarking, though many SME owners choose to do so when presenting a competitor quote during a renegotiation. Providers understand that business owners compare options and professional relationships are rarely affected by a straightforward market review.
What is a deed of priority and do I need one when switching?
A deed of priority is a formal agreement between two lenders that establishes which party has the primary claim over specific assets, typically your debtor book, if both hold security over your business. If your existing invoice finance provider also holds a general debenture alongside your bank, the incoming provider may require a deed of priority or a release of the existing charge before they will complete the facility. Your solicitor or the new provider's legal team can manage this process, but it adds time to the transition.
Can I switch from disclosed factoring to confidential invoice discounting when I change provider?
Yes, subject to the new provider's credit assessment and eligibility criteria. Confidential invoice discounting is typically available to businesses with established sales ledger management, a clear audit trail of invoices and a turnover above a threshold that varies by provider, commonly £500,000 or more. If your business has grown since your current facility was set up and you previously did not qualify for a confidential product, a review is a good opportunity to ask whether that has changed.
Are there sectors where switching invoice finance provider is more complicated?
Yes. Construction businesses with contracts subject to the Housing Grants, Construction and Regeneration Act 1996, and businesses with invoices that carry a right of set-off or contra charge arrangements, can present additional complexity for incoming providers. Recruitment agencies with high volumes of weekly timesheet invoices and care businesses with local authority debtors may also find that not all providers have the operational infrastructure to manage their ledger efficiently. It is worth confirming sector experience with any new provider before committing to switch.
Director, Market Invoice
Oliver leads Market Invoice's editorial and comparison research. With a background in UK commercial finance, he oversees provider analysis, rate verification, and industry reporting across all verticals.
Last reviewed: 10 June 2026