An invoice discounting facility is an ongoing finance agreement linked to a business's sales ledger. The amount you can actually draw changes as invoices are approved, paid, credited or excluded. The facility limit is a ceiling; it is not a promise that the full amount will always be available.
Four figures that determine available funding
- Gross ledger: the total of outstanding customer invoices before exclusions.
- Eligible ledger: the portion the provider accepts under the agreement.
- Funding limit: the contractual ceiling on borrowing.
- Availability: the further amount currently drawable after existing drawings, fees and reserves.
A borrowing-base illustration
Assume a gross ledger of £150,000. The provider excludes £20,000 of aged or disputed invoices, leaving £130,000 eligible. An illustrative 85% advance gives £110,500. If the facility cap is £100,000, the cap limits that figure. A £5,000 reserve and £60,000 already drawn leave £35,000 of further availability in this simplified example.
The order and treatment of deductions depend on the contract. Some reserves reduce eligible debt before the percentage is applied; others operate against availability. Ask the provider to show its own calculation rather than copying this illustration into a cash forecast unchanged.
Customer concentration
A large customer can account for a high proportion of your outstanding invoices. A concentration limit caps how much of that customer's debt the provider will fund. Several customers may count towards one limit if they are part of the same group, so identify the legal entities behind your largest accounts.
Ageing, disputes and dilution
An invoice can stop qualifying when it becomes too old or is disputed. Credit notes, returns, rebates and offsets can reduce the collectible balance; this is often called dilution. Strong reporting makes these adjustments visible early. Waiting until an audit to correct them can cause an unexpected funding reduction.
How sales growth affects funding
More eligible invoices can support more funding, but only within the agreed limit and controls. If turnover is rising quickly, discuss a limit increase in advance. Equally, falling sales can shrink availability before you have reduced fixed costs. Test a downside case where sales fall and customers also pay later.
Security and ongoing obligations
Read the agreement's security, reporting, audit, guarantee and default provisions. Ask what existing charges must be released and what happens if another lender has rights over receivables. Keep a clear list of reporting deadlines and the person responsible for each.
Ask for a calculation using your own invoices
Ask for an opening availability statement using your live aged-debtor report, followed by an example for your forecast peak month. Reconcile both to your weekly cash requirement. That gives a more practical measure of suitability than comparing the largest advertised facility limits.
Sources and verification
Published material checked on 24 October 2026. Provider terms can change; confirm them before applying. Examples and comparison methods are our own illustrations.
