Invoice Factoring
Bank or independent invoice finance?
Banks and independent lenders sell the same product with different appetites. The difference shows up when your business is growing fast or does not fit a template.
Invoice finance is offered both by the big banks — often as part of a wider relationship — and by a large market of independent and challenger lenders.
The product mechanics are similar. What differs is who they will lend to, how quickly decisions are made, and what happens when something unusual comes up.
Side by side
| Bank | Independent | |
|---|---|---|
| Headline cost | Often lower | Often slightly higher |
| Credit appetite | More conservative | Broader, including newer businesses |
| Speed of decision | Slower, more committee | Usually faster |
| Flexibility on unusual ledgers | Limited | Often the specialism |
| Relationship manager | May change frequently | Often a named contact |
| Cross-selling | Likely — accounts, loans, cards | Less so |
| Sector specialists | Less common | Common — construction, recruitment, haulage |
Where banks win
Price, usually, and the convenience of one relationship. If your business is established, profitable, with a spread of good-quality debtors and no complications, a bank facility is likely to be the cheapest route.
There is also something to be said for having your lending and your banking in one place when you need a decision quickly on something else.
Where independents win
Appetite. If you are newer, growing fast, recovering from a difficult period, or have a ledger with awkward features — contractual debts, staged billing, heavy customer concentration — an independent is far more likely to look at it properly.
Specialism matters too. Construction, recruitment and haulage all have quirks that a sector-specialist lender understands and a generalist may simply decline.
Independents are also generally faster, which matters when the reason you want the facility is a cash-flow gap next month rather than next quarter.
Compare on the same basis
Ask both for a total cost illustration in pounds against your real turnover and average debtor days — not a percentage, and not a headline rate. Include the service fee, the discount fee and the minimum monthly charge.
Then compare the terms that actually bite: advance rate, concentration limit, which invoices are ineligible, notice period and termination fee. A cheaper facility that funds less of your ledger is not cheaper.
A note on the relationship
Invoice finance is not a product you set up and forget. Your funding availability changes weekly with your ledger, and you will speak to the lender regularly.
Ask who you would actually deal with day to day, and whether that person changes. It sounds like a soft consideration and it is the one businesses complain about most.
The short answer
Established, profitable, clean ledger, price-sensitive: a bank facility is likely the cheapest.
Growing fast, newer, sector-specific, or a ledger with complications: an independent, and expect a faster and more flexible answer.
Either way, compare in pounds against your own numbers, and check the concentration limit before anything else.
Ready to compare invoice finance?
Compare Invoice Factoring is our dedicated site for this category, with the detail, local coverage and a quote form.
Common questions
Are independent lenders more expensive?
Often slightly, on the headline. They also tend to fund ledgers a bank would decline, so the useful comparison is what each will actually advance you.
Do I have to bank with the lender?
Not with an independent. Banks may prefer or require it as part of the relationship — ask early if that matters to you.
Is an independent lender regulated?
Commercial lending is not regulated in the same way as consumer credit. Check membership of UK Finance and what independent complaints route exists for a small business.
Can I move between them later?
Yes, and takeovers between providers are routine — but check the notice period and termination fee before you commit to either.
Before you request a quote
What this should cost, what moves the price, and the questions to put to any supplier.
Invoice Factoring
Invoice finance is priced with two separate fees, and comparing on either one alone will mislead you. You need both, plus the minimum charge.
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