Can I Factor Invoices to Private Individuals?

What counts as a business customer

What matters is who you are billing, not what kind of business you are. A sole trader, partnership or limited company can all use invoice finance, as long as the invoices go to other businesses that buy from you on credit terms.

• Usually fine: limited companies, LLPs, partnerships, public bodies such as councils and NHS trusts, and sole traders buying for their business.
• Not fine: people buying for themselves, such as a homeowner who pays for a new kitchen or a couple paying for a wedding. This is the case even if the bill is large.
• Check with the lender: a sole trader customer can be harder to judge, because the same person can buy as a business or as a private person. The lender will want to see that the purchase was for their business.

If you sell to both businesses and the public

You can still use invoice finance on the business side. The lender will check your sales ledger and leave out any invoices to private customers. So the money you can get depends on your unpaid business invoices at any one time, not on your total sales.

If most of your sales are to the public

Invoice finance will not help much. Other options include a business loan, an overdraft or asset finance. Card-heavy businesses are sometimes offered a merchant cash advance, which is paid back from future card takings. These work in very different ways and can cost a lot more, so compare the total you would pay back, not just the headline rate. Our alternatives to invoice finance page explains the main options.

What to do next

• Go through your sales ledger and mark which customers are businesses and which are private people.
• Work out how much you are owed by business customers on a typical day. That is roughly what a lender can fund against.
• If you only want to fund some business invoices, look at selective invoice finance.

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