These definitions explain common invoice-finance terms. Your agreement may define a term more specifically, so check the wording where it affects the amount available, the charges or your responsibilities.
Advance rate
The percentage applied to eligible invoices to calculate a starting funding amount. It is not necessarily the percentage of your entire ledger that can be drawn.
Aged debtor report
A list of customer balances grouped by how long they have been outstanding or overdue. The ageing convention should be clear.
Availability
The additional amount currently drawable after the relevant limits, reserves, charges and existing drawings are taken into account.
Borrowing base
The assets or receivables accepted to support borrowing, after the provider's adjustments. Its calculation is defined in the facility documents.
CHOCCS and CHOCS
Names for invoice finance arrangements where the business keeps its own credit control or collections. Providers use different expansions of the acronym. A CHOCS facility can be disclosed, so retaining collections does not by itself guarantee confidentiality.
Confidential invoice discounting (CID)
A discounting structure designed not to routinely disclose the funding arrangement to customers. Ask about disclosure triggers and collection arrangements.
Concentration limit
A restriction on the exposure accepted for one customer or connected group. It can reduce funding even when the invoice itself is valid.
Credit note and dilution
A credit note reduces an invoice balance. Dilution is a wider description of reductions such as credits, returns, rebates and other adjustments to collectible sales.
Debtor
The customer that owes the business money. Identify the legal entity, rather than only a trading name.
Discount charge
The financing charge on the funded balance under the agreement. Check its rate, reference rate, day basis and charging period.
Disclosed invoice discounting
A discounting arrangement where the finance provider's involvement is visible to customers. Disclosure and responsibility for collections are separate questions.
Eligible debt
Receivables that meet the funder's criteria. A business's total outstanding invoices can be larger than its eligible debt.
Factoring
Invoice finance that normally includes ledger management and a collections service from the provider, in addition to funding.
Facility limit
The agreed maximum borrowing. Availability may be lower because of ledger eligibility, reserves and current usage.
Invoice finance
The umbrella term for funding against unpaid customer invoices, including discounting and factoring. Selection of invoices, collection responsibilities and disclosure are separate features.
Invoice discounting
Invoice finance where the business normally keeps day-to-day management of its sales ledger and customer collections. It may be confidential or disclosed, depending on the agreement.
Minimum service fee
A contractual minimum charge for a period. It can apply even where actual usage or sales are low.
Recourse
The provider's ability to require the business to repay funding in specified circumstances, including certain uncollected debts.
Reserve and retention
Amounts held back in the funding calculation. Do not confuse a finance-provider reserve with a construction-contract retention; they arise for different reasons.
Sales ledger
The business record of customer invoices, receipts, credit notes and balances outstanding.
Selective invoice finance and spot finance
Selective finance covers chosen customer accounts or invoices, subject to the agreement. The British Business Bank distinguishes selected-account finance from spot factoring of individual invoices. Confirm the scope rather than assuming the labels are interchangeable.
Service fee
A charge for administering or providing the facility. Confirm whether it is based on invoice turnover, a fixed amount or another contractual base.
Whole-ledger facility
A structure covering a defined portfolio of receivables rather than choosing each individual invoice. Eligibility rules can still exclude some debts.
Sources and verification
Published material checked on 27 October 2026. Provider terms can change; confirm them before applying. Examples and comparison methods are our own illustrations.
