What is Invoice Factoring?

Invoice factoring is a form of business finance where a company sells its unpaid invoices to a factoring provider at a discount in exchange for immediate cash. The factoring company then manages the sales ledger and collects payment directly from customers. It provides fast access to working capital without waiting for customer payment terms — and removes the burden of credit control. Seven Hills Capital Group compares the full UK factoring market to find the right provider for your sector and customer base.

You raise invoices to your customers as normal

You sell those invoices to a factoring company — typically receiving 80–90% of their value immediately

The factoring company takes over management of your sales ledger

Your customers pay the factoring company directly on their normal payment terms

Once collected, the factoring company releases the remaining balance minus their fee

Pros

• Immediate cash — access up to 90% of invoice value within 24 hours of raising
• Credit control outsourced — the factor chases payment from your customers on your behalf
• Facility grows with your business as your invoiced turnover increases
• Can improve debtor days and reduce exposure to bad debt

Things To Consider

• Customers are aware of the arrangement — less confidential than invoice discounting
• Fees are typically higher than confidential invoice discounting facilities
• You cede day-to-day control of customer payment relationships to the factor
• Not suitable for consumer-facing businesses or point-of-sale transactions

How Seven Hills Capital Group Could Help Your Business

Every business situation is different. The illustrative examples on our case studies page are based on common scenarios we see from UK business owners and landlords - showing how the right finance product, found through a whole-of-market broker, can make a real difference.

How is invoice factoring different from invoice discounting?

With invoice factoring the finance provider manages your sales ledger and collects payment from customers directly — making the arrangement visible to them. With invoice discounting you retain control of your ledger and collect payment yourself, keeping it confidential. Seven Hills Capital Group will advise which is right for your business.

What percentage of my invoices can I access through factoring?

Invoice factoring companies typically advance 80–90% of the invoice value immediately. The remaining balance minus fees is released once your customer pays. The advance rate depends on your industry and the creditworthiness of your customers — we will identify the best rate available.

Will my customers know I am using invoice factoring?

Yes. Your customers receive payment instructions from the factoring company and pay them directly. This differs from confidential invoice discounting. Seven Hills Capital Group will help you consider how to communicate this to your customer base if needed.

What happens if a customer does not pay?

This depends on whether your factoring facility is recourse or non-recourse. With recourse factoring you are liable if a customer defaults. With non-recourse factoring the risk transfers to the factor. Non-recourse facilities cost more — Seven Hills Capital Group will identify which option is most appropriate for your debtor profile.

Is invoice factoring suitable for all business types?

Invoice factoring is specifically for B2B businesses that invoice other businesses on credit terms. It is not suitable for consumer-facing businesses or businesses that take payment at point of sale. If you are unsure whether you qualify, speak to our team — we will give you an honest answer quickly.