Invoice Finance Glossary
Every invoice finance term explained in plain English. No jargon, no waffle.
Advance Rate
The percentage of the invoice value the provider gives you upfront. Typically 70-95%. On a £10,000 invoice with an 85% advance rate, you get £8,500 immediately.
Asset Based Lending (ABL)
A broader form of lending that includes invoice finance plus funding against stock, machinery, and property. Invoice finance is the most common component of ABL. Full guide.
Availability / Available Funds
The amount of cash you can draw at any time. Calculated as: total invoices submitted x advance rate, minus what you've already drawn.
Bad Debt Protection
Insurance that covers you if a customer goes bust and can't pay. Costs 0.3-1.5% extra. Same as non-recourse factoring. Full explanation.
CHAPS
Same-day bank transfer. Costs £15-25 per transfer. Used when you need the advance in your bank today, not tomorrow. CHAPS vs BACS vs Faster Payments.
Concentration Limit
The maximum percentage of your facility that can be against one customer. Usually 25-40%. If 60% of your invoices are to one customer, advances on that customer may be capped. Why it matters.
Confidential Invoice Discounting
Invoice finance where your customers don't know you use it. You manage collections yourself. 85% of the UK market uses this. Requires £250k-500k+ turnover. Full guide.
Debenture
A legal charge registered at Companies House giving the provider a claim over your company's assets. Standard practice — almost all providers require one. Doesn't affect day-to-day operations. Full explanation.
Debt Factoring
Old term for invoice factoring. Same product, outdated name. Full guide.
Debtor
Your customer — the business that owes you money on the invoice. The provider assesses your debtor's creditworthiness, not yours.
Discount Charge
Interest on the money advanced to you. Quoted as base rate + 1-3%. Charged daily until your customer pays. The longer they take, the more you pay. Full explanation.
Invoice Factoring
The provider advances cash against your invoices AND manages credit control (chases your customers for payment). Customers know you use finance. From £50k turnover. How it works.
Invoice Discounting
The provider advances cash but YOU manage credit control. Customers don't know. More common than factoring (85% of market). From £250k-500k turnover. Factoring vs discounting.
Non-Recourse Factoring
If your customer goes bust and can't pay, the provider absorbs the loss. You keep the advance. Costs 0.3-1.5% more than recourse. Full comparison.
Personal Guarantee (PG)
A promise that YOU personally will repay if the company can't. Banks always require one. Some independents don't. Providers without PG.
Receivables / Trade Receivables
The money your customers owe you. Your outstanding invoices. "Receivables finance" is the bank/corporate term for invoice finance. Full guide.
Recourse Factoring
If your customer doesn't pay, YOU repay the advance. You bear the default risk. Cheaper than non-recourse. About 70% of the UK market. Full comparison.
Reserve / Retention
The portion held back (100% minus advance rate). On an 85% advance, the 15% reserve is held until your customer pays. Fees are deducted from this. Full explanation.
Selective / Spot Factoring
Finance individual invoices without committing to a full facility. No long-term contract. Costs more per invoice (1-5%) but maximum flexibility. Full guide.
Service Charge
The main fee — 0.5-3% of the gross invoice value. Covers admin, credit checks, and (for factoring) credit control. This is the headline rate providers advertise. Full explanation.
Whole-Turnover Factoring
All your invoices go through the facility — you can't pick and choose. Standard model. Gets you the best rates because the provider has visibility of your entire debtor book. Full explanation.