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Invoice finance

Invoice finance is where a business supplier of either goods or services assigns the debt due to it from its customers to a finance company in return for an immediate up-front payment of up to about 80% of the value of the debts assigned and the balance, less charges, being payable when the customers pay.

Factoring or invoice discounting are types of invoice finance. It’s recommended that you speak to an expert in this area to make sure that you choose the best invoice financing solution for your specific business needs.

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Why does a business factor its debts?

It is a cash flow exercise.

Upon payment of a fee, the supplier can obtain credit control and bad debt protection.

By factoring its debts, a business can obtain payment of the vast majority of the debts due to it without having to wait maybe two or three months for payment.

Types of factoring agreements

There are a number of different types of agreements, but the most commonly used by invoice financing companies are:

The first is a disclosed factoring agreement where the customers of the business are told about the assignment of the debt.

The second is a confidential undisclosed agreement where the customers of the business are not told about the assignment.

Where there is a disclosed factoring agreement, the customers are told by means of notice of assignment on the invoices and on the monthly statements of account, which notify the customers that the debt has been assigned to the finance company to whom payment should be made.


If the business factoring its debts is a limited company, then the finance company may well seek security in a number of ways:

  1. By obtaining a deed of waiver and priority from any third party (usually a bank) who has registered a charge or debenture at Companies House
  2. By taking a deed of guarantee and indemnity from say a director or shareholder of the company
  3. By taking a charge over some property

If the business factoring its debts is either a sole trader or a partnership, and it enters into a whole turnover factoring or invoice discounting agreement then the finance company may also register the agreement at The Bills of Sale Registry to avoid a possible challenge by a trustee in bankruptcy pursuant to section 344 of the Insolvency Act.

Why instruct Stephensons?

Members of our team have been dealing with factors and factoring related issues for decades. They have not only contributed to textbooks on the subject but also lectured the industry’s trade association and published articles. They have been involved in some of the well-known factoring cases.

Advice on personal guarantees and other security

Before you enter into the guarantee or agree to give a charge over your home or other property, you should take legal advice. We can explain to you the meaning and effect of the security on you, what your responsibilities will be and your potential losses.

Our advice will help you understand and decide whether it is in your best interests to give the security requested by the lender.

Advice and assistance in disputes with your lender

We have decades of experience in dealing with disputes arising under invoice finance and other debt financing agreements. We can assist with:

  • Claims by Lenders against your business for monies due under the agreement
  • Disputes relating to breaches of agreements by lenders
  • Disputes relating to excessive or unfair charges made by lenders
  • Claims by Lenders under personal guarantees
  • Dealing with claims against guarantors where individuals dispute liability because, for example the lender has misrepresented the terms of the guarantee; the circumstances in which the lender would make a claim or the extent of the financial liability
  • Dealing with claims against guarantors who fall within the ‘protected persons’ category, where that person has signed the guarantee without first taking legal advice, or under duress

We will work with you to achieve a swift outcome, where possible negotiating settlement terms to avoid court action.

We are experienced in acting for both the finance companies who factor the debts and the businesses who assign their debts. Call us on 0161 696 6170  for more information on our flexible invoice finance solutions. Alternatively, please complete our online enquiry form and a member of the team will contact you directly. 

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