Factoring vs invoice discounting: the UK market split

Most UK invoice finance is invoice discounting, not factoring. Roughly two thirds of client businesses use invoice discounting and about one third use factoring. Because discounting is favoured by larger companies, its share of total pounds advanced is higher still.

The practical difference is who chases payment: with factoring the lender collects and the facility is usually disclosed to your customers; with invoice discounting you keep collections and it is usually confidential. Discounting also tends to be cheaper, at around 0.90% of turnover against about 1.27% for factoring, before the base rate.

The split, side by side

Feature	Factoring	Invoice discounting
Share of client businesses	About one third	About two thirds
Share of total pounds advanced	Lower still (smaller clients)	Higher (larger clients)
Who chases payment	The lender collects	You keep collections
Confidential to your customers	Usually disclosed	Usually confidential
Typical total cost (ex base rate, % of turnover)	About 1.27%	About 0.90%
Typical user	Smaller firms wanting collections handled	Larger firms keeping control

Figures as at June 2026. Client-split from UK Finance / FLA invoice finance data; cost figures from published UK invoice finance benchmarks. Actual terms vary by provider, business size and sector.

Why discounting dominates

Invoice discounting lets a business keep control of its own credit control and keep the facility confidential, which appeals to larger firms and to growing SMEs that do not want their customers to know they use finance. Factoring bundles in the collections work, which suits smaller businesses that would rather hand that over. The market has moved steadily towards discounting and digital platforms over the last decade, reflecting demand for speed, flexibility and discretion.

How this is measured

The client split between factoring and invoice discounting is drawn from UK Finance and Finance and Leasing Association invoice finance and asset-based lending data, which tracks member lending by product. The cost figures, around 0.90% of turnover for invoice discounting and 1.27% for factoring excluding the base rate, and the average advance of about 87.4%, come from published UK invoice finance benchmark data.

These are market averages; a specific quote depends on your turnover, sector, debtor spread and the provider. Last reviewed June 2026.

Cite this dataset

To reference these figures, please credit MarketInvoice and link to this page:

Source: MarketInvoice, UK Factoring vs Invoice Discounting Market Split, https://marketinvoice.co.uk/data/factoring-vs-discounting-market-split/ (accessed 2026-06-26).