What happens to my unpaid invoice if my customer goes into administration?
It becomes an unsecured debt against the estate. Register with the appointed administrator within 21 days of the first creditors' notice and submit a proof of debt with copies of invoices, statements and contracts. Unsecured creditors typically recover 0p-30p in the pound, paid 12-36 months later. If you sold the invoice to a non-recourse spot factoring provider before the administration filing, the factor absorbs the loss. With trade credit insurance you can claim 70-90% of the invoice value within 90 days.
What this means for your business
If your customer enters administration, any invoice you haven't been paid for becomes an unsecured claim against what's left of the business, not a guaranteed payment. Administrators deal with secured creditors and preferential claims first, so unsecured trade creditors are near the back of the queue.
You need to formally register your claim by submitting a proof of debt to the administrator, backed by copies of the invoice, delivery or service evidence, and any underlying contract, usually within 21 days of the first creditors' notice. Most unsecured creditors see only a small fraction of what they're owed, and it can take one to three years to arrive.
The main ways to avoid this exposure are selling the debt before the failure through non-recourse spot factoring, or holding trade credit insurance that pays out quickly regardless of the administration's eventual outcome.
Key points
- The unpaid invoice ranks as an unsecured debt, behind secured lenders and preferential creditors in the administration.
- You must submit a proof of debt to the administrator, usually within 21 days of the first creditors' notice, with invoices, statements and contracts attached.
- Unsecured creditors typically recover only 0p to 30p in the pound, and payment can take 12 to 36 months.
- Selling the invoice to a non-recourse spot factoring provider before the administration filing shifts the loss onto the factor.
- Trade credit insurance can pay out 70% to 90% of the invoice value within around 90 days, well ahead of any administration dividend.
Common pitfalls
The biggest mistake is missing the proof of debt deadline, which can mean forfeiting any right to a dividend at all. Businesses also assume administration means total write-off, when in fact a partial recovery is common, just slow. Another trap is relying on recourse factoring, where the factoring provider can claim the money back from you if the customer defaults, so the credit risk never actually leaves your books.
Always check whether an invoice finance facility is recourse or non-recourse before assuming you're protected, and keep paperwork organised so a proof of debt can be filed quickly.
Related questions
What's the difference between recourse and non-recourse factoring when a customer fails?
With recourse factoring, if your customer doesn't pay, the factor can reclaim the advance from you, so you still carry the credit risk. With non-recourse factoring, the factor absorbs the loss if the customer becomes insolvent, provided the debt was sold before the insolvency event and met the provider's credit terms.
Can I still use invoice finance on invoices owed by a customer already in administration?
Generally no. Invoice finance providers assess the credit risk of the debtor before agreeing to fund an invoice, so once a customer has entered administration, that specific invoice is very unlikely to be accepted onto a facility.
Does administration mean the same thing as liquidation for my unpaid invoice?
No, administration and liquidation are different insolvency processes. Administration aims to rescue the business or achieve a better outcome for creditors than liquidation, and can sometimes end in the company continuing to trade, whereas liquidation winds the company up and sells its assets, with proceeds distributed to creditors.
Founder & Managing Director, Muswell Rose, founder and PSC of Best Business Loans Ltd
Adam is the founder and managing director of Muswell Rose and a founder of Best Business Loans Ltd, the company behind Market Invoice. He spent over three years as managing director of Penny, a UK invoice finance business, and his career runs through insurance, mortgages, commercial finance and fintech lending. He writes the Market Invoice library.
Last reviewed: 23 July 2026