Invoice finance is the umbrella term for business funding against unpaid customer invoices. Invoice discounting and factoring are two main forms. Other labels describe which invoices are funded, whether customers know about the arrangement, or who handles credit control. Those features can overlap.
Three questions that explain the terminology
Compare a proposal on three separate dimensions: the invoices covered, responsibility for chasing payment, and disclosure to customers. A selective facility could be disclosed or confidential; a business can retain collections even when its customers know a funder is involved.
| Term | What it describes | What to confirm |
|---|---|---|
| Invoice discounting | Funding with collections normally retained by the business | Reporting, payment accounts and disclosure |
| Confidential invoice discounting | Discounting without routine customer disclosure | Verification and disclosure triggers |
| Invoice factoring | Funding normally combined with a provider collections service | The exact service and customer contact |
| Selective invoice finance | Funding chosen accounts or invoices | What can be selected and any ongoing commitment |
| CHOCCS or CHOCS | An arrangement keeping credit control with the business | Disclosure, payment instructions and intervention rights |
The individual guides below explain each structure. Product names alone do not settle the contractual details.
Follow the cash rather than the headline limit
For an illustration, assume £40,000 of invoices are eligible and the agreed advance is 80%. The starting funding amount is £32,000. If £10,000 has already been drawn and a £2,000 reserve applies, additional availability is £20,000, before any other deductions and subject to the facility limit. This is a calculation example, not a quotation.
Do not count the full £40,000 as cash available now. The remaining invoice balance is released or accounted for when payment arrives, after the advance, charges and adjustments are settled.
Compare the operating work
Write down who will issue invoices, allocate receipts, resolve disputes, chase late customers and report changes to the funder. Factoring can add a collections service; discounting usually leaves that work with your team. Neither label removes the need for reliable records.
Ask for a complete cost comparison
Obtain written charges for your expected annual use, including quiet months. Ask for the financing charge, service fee, minimum fees, setup costs and exit provisions. For selected-invoice funding, also ask what an early or late customer payment does to the total price. Compare costs in pounds alongside the cash actually available.
Prepare before requesting terms
Prepare an aged-debtor report, recent accounts, customer payment history, supporting invoices and a cash forecast. Identify disputes and credit notes rather than presenting them as fully collectible debts. Explain whether the gap occurs occasionally or every month, and whether you need help collecting payments.
Non-payment risk needs its own answer
Financing an invoice does not mean the customer will pay. Ask what happens if a funded invoice becomes overdue or disputed, and whether you must repay the advance. Credit protection, where offered, has separate conditions and exclusions. Compare those terms with our recourse guide before deciding.
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.
