Pros and cons of an invoice finance facility for your business

Pros and cons of an invoice finance facility for your businessDiscover the remarkable benefits of factoring your invoices—an ingenious strategy to effortlessly boost your working capital. Bid farewell to the anxieties and strains of timely bill payments, and embrace a future where you can meticulously chart your path towards sustainable expansion.

The advantages and disadvantages of factoring may fluctuate based on your unique business characteristics. However, one prominent transformation awaits you: a steady stream of cash advances courtesy of your trusted lender.

These advances are calculated by considering the invoices you dispatch, typically amounting to an impressive 80% to 90% of each approved invoice

Advantages of invoice factoring

Unlocking the Path to Expansion

In today’s challenging lending landscape, small businesses often face obstacles when seeking traditional bank loans. However, the unique characteristics of invoice factoring offer a less risky proposition, not only for the lender but also for the borrower.

Prepare for growth across multiple fronts:

  1. Amplify your marketing budget
  2. Acquire additional capital assets
  3. Gain confidence in meeting liabilities
  4. Expand your workforce to meet rising demand

When your business is poised for progress, invoice factoring emerges as a secure means to fund growth without jeopardizing your existing positive cash flow.

Embrace the Freedom to Focus

Invoice factoring liberates you from the burdens of credit management by placing it in the capable hands of your lender. This transition brings forth a multitude of benefits, including the precious gift of time to dedicate to running your company.

Direct your energies toward:

  1. Elevating customer service to new heights
  2. Engaging in activities that drive sales
  3. Crafting strategic plans for the future

Endless Borrowing Possibilities

The limit of your borrowing capacity is solely tied to the number of approved invoices you send out. Gone are the days of enduring lengthy credit checks and burdensome paperwork to secure additional funding when the need arises.

Swift Access to Cash

Cash is typically advanced within a mere 24 hours of invoice submission. This expedited access empowers you to operate your business with cost-effectiveness. Contrasting against the conventional delay of 30 to 60 days between invoice dispatch and fund reception, you’ll revel in the enhanced flexibility when managing your own payments.

Experience the following advantages:

  1. Unleash potential early payment discounts from suppliers that may offset your lender’s fees
  2. Ensure timely payment of staff salaries and regular bills throughout the month
  3. Safeguard against long-term liabilities

Leave Other Funding Options Behind

By harnessing the value residing within your sales ledger, invoice finance eliminates the need to tap into your capital assets. While other types of asset-based lending serve their purpose, invoice finance stands out with its flexibility, granting access to funds without the burden of excessive debt.

A Plethora of Providers, Minimal Risk

The factoring market abounds with numerous companies vying to offer their services. This wealth of choice empowers you to select the ideal provider for your unique needs.

Rest assured, invoice factoring presents low risk for both parties involved. Personal guarantees and collateral are unnecessary, and since lending is based on completed work, the lender’s risk is mitigated. The factoring company assumes the responsibility of collecting payments, leveraging robust and efficient procedures.

Amidst the array of advantages and benefits that factoring brings, it is essential to acknowledge that invoice finance may not suit every business, as with any type of lending.

Disadvantages of factoring

Navigating the Exit Maze

Exiting a factoring agreement can prove challenging due to the sudden reduction in cash inflows. However, with careful management, this hurdle can be overcome. While some lenders may require a lengthy notice period to terminate the agreement, it is not an insurmountable problem.

Unveiling the Fee and Term Enigma

Understanding the terms and conditions of a factoring agreement is crucial, and it’s essential to align them with your business requirements. If fees and charges seem high at first glance, it’s important to consider the potential for long-term growth rather than solely focusing on the immediate situation.

Preserving Customer Relationships

If cultivating strong customer relationships is a cornerstone of your business, factoring your invoices may raise concerns among your clientele. The notion of entrusting their debts to a third party might not sit well with them, potentially impacting your company’s image.

Adapting Operational Practices

Certain factoring agreements necessitate changes to the way your business operates. This can be the case if a few of your customers have less-than-desirable creditworthiness or if you’re not fully capitalizing on market opportunities.

Overall, the advantages of factoring appear to outweigh the disadvantages. However, the efficiency of your sales ledger processes and your level of turnover play significant roles in determining the suitability of this financing option.

Discover Tailored Guidance

Business Insolvency Helplines, business finance team understand the intricacies of factoring and can assist you in determining whether this financing solution aligns with your business.

Leveraging our long-standing relationships with a diverse range of lenders, we provide expert guidance on the terms and conditions, fees, and costs associated with invoice factoring.


What are the advantages of invoice factoring?

The advantages of invoice factoring including reliable working capital, stress-free bill payments, sustainable growth planning, and regular cash advances based on invoices. It provides flexibility for increased budgets, asset purchases, meeting liabilities, and hiring staff. Factoring saves time by outsourcing credit procedures, allowing focus on core operations and strategic planning. It offers unlimited borrowing, fast cash access, and low-risk without personal guarantees or collateral. In summary, invoice factoring is an attractive financing solution for businesses.

What are the disadvantages of factoring?

The disadvantages of factoring are it is Expensive: This can be an expensive source of finance when the invoices are numerous and smaller in amount. Higher interest rate: The advance provided is generally available at a higher interest cost than the usual rate.


In conclusion, invoice factoring presents a range of advantages and disadvantages. The pros include reliable working capital, stress-free bill payments, regular cash advances, and the flexibility to fuel growth. However, there are cons to consider, such as potential difficulties in exiting agreements and the impact on customer relationships.

To delve deeper into the intricacies of invoice factoring and determine its suitability for your business, we invite you to complete our online enquiry form. Our team will be delighted to provide you with more information and personalized guidance to help you make an informed decision.

Lee Jones Profile
Business Finance Expert at Business Insolvency Helpline

Lee Jones is a seasoned expert in the field of business finance with over two decades of experience. With a keen understanding of financial markets and a passion for helping businesses thrive, Lee has become a trusted advisor to countless companies across the United Kingdom.