The Best Invoice Factoring Services for Small Businesses in 2022

By Rob Binns | Senior Writer | Updated: 11 December 2019

When you’re a small business, every penny matters, and every slow invoice can feel like it’s holding you back. Businesses like this stand to gain a lot from invoice factoring, yet they often haven’t been able to find a provider willing work with them.

Fortunately, that’s all starting to change. We’ve found four excellent invoice factoring companies that are happy to work with smaller businesses. Read on to hear our reviews.

Barista woman smiling by a coffee machine
Invoice factoring helps small businesses access cash that's tied up in unpaid invoices

What is invoice factoring?

Invoice factoring (also known as invoice financing) is a method of accessing the funds of unpaid invoices to free up cash flow. It’s kind of like a line of credit. Invoice factoring companies take on the task of chasing up invoices, and give you up to 90% of their value in the meantime. When they are paid, you get the remaining balance minus a predetermined fee.

How does invoice factoring work?

Invoice factoring is a six step process:

how invoice financing companies work

Recourse vs. non-recourse factoring

There are two types of invoice factoring:

  1. Recourse factoring: the factor (invoice factoring company) chases the payment on your behalf, but you ultimately remain responsible for the payment. If the invoice doesn’t get paid, you’ll have to pay back your advance.
  2. Non-recourse factoring: the factor both chases payment, and takes on the responsibility of the debt. This option isn’t often available to small businesses due to the risk it poses for the factor, and rates will be higher to reflect this.

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Best invoice factoring companies for small businesses

We’ve compared the best invoice factoring companies around today to give you our top pick for small businesses. Only companies which accept clients with a minimum annual turnover of £50k to £100k made the cut: Ashley Business Finance, Aldermore, Hitachi Capital UK, Bibby Financial Services.

Top 5 invoice financing companies for small businesses:

Does your business turn over more than £100k a year? Check out the Top 10 UK invoice factoring companies

Ashley Business Finance

Best invoice finance for bespoke solutions

Ashley don’t just accept small businesses, they welcome them with open arms. It’s what their whole business is based around. They succeed where many providers fail, even working with small businesses with low credit scores. Their rates are reasonable, and their ‘confidential’ option means your clients won’t know you’re using a factoring company.

Ashley Finance at a glance:

  • Advance rate: Up to 90%
  • Minimum client turnover (approx.): £50k
  • Discount fee: 1.5-4%
  • Service fee: 1-3%

Request a quote >

Aldermore Invoice Finance

Best invoice finance for personalised service

Aldermore are the perfect antidote to the stuffy world of traditional finance. Since their formation in 2009, they have picked up an incredible 22 awards for innovation and service. They approve nine out of 10 applications, and assign each customer a ‘relationship manager’ for the most personal experience possible.

Aldermore at a glance:

  • Advance rate: Up to 90%
  • Minimum client turnover (approx.): £60k
  • Discount fee: 1.5-3%
  • Service fee: 0.25-3%

Request a quote >

Funding Options

Best invoice finance for startups

With the backing of the British Business Bank and and a cabinet of industry awards to its name, Funding Options is one of the safest options for businesses that are new to invoice finance. It's a brokerage that works to match your startup with one of over 50 invoice finance providers in the UK, and is dedicated to making sure you get the best deal. It also comes with fantastic online approval ratings – so you know that you'll be getting some of the friendliest, most customer-focused service on the market.

Funding Options at a glance:

  • Advance rate: dependent on the supplier you're matched with
  • Minimum client turnover (approx.): dependent on the supplier you're matched with
  • Discount fee: dependent on the supplier you're matched with
  • Service fee: dependent on the supplier you're matched with

Request a quote >

Hitachi Capital UK

Best invoice finance for flexibility

With over 800,000 customers, Hitachi Capital is one of the largest invoice factoring companies in the world. Their fixed service fee makes for simple billing, but means that you won’t get good value from their services unless you are billing upwards of around £9k per client.

Hitachi Capital website

Hitachi at a glance:

  • Advance rate: Up to 85%
  • Minimum client turnover (approx.): £50k
  • Discount fee: 0.45-4%
  • Service fee: £250 fixed

Request a quote >

Bibby Financial Services

Best invoice finance for customer support

Bibby was awarded the prestigious title of ‘Best Factor and Invoice Discounter’ at the National Association of Commercial Finance Brokers Awards 2017. They have an impressive Trustpilot score of nine out of 10 from over 22 reviews, which is especially impressive given their large size. Customers praise their helpful, honest and professional service.

Bibby at a glance:

  • Advance rate: Up to 90%
  • Minimum client turnover (approx.): £100k
  • Discount fee: 1-3.5%
  • Service fee: 0.5-3.2%

Request a quote >

Pros and cons of invoice factoring for small businesses

Advantages of invoice factoring

There are plenty of reasons for small businesses to consider using an invoice factoring provider, including:

  • Freeing up cash flow
  • Reducing risk of debt
  • Ability to plan better

1. Freeing up cash flow

As we said before, when you’re running a small business, every penny counts – always. That’s why the main reason small businesses use invoice financing services is to free up future funds that would otherwise be held as pending.

2. Reducing risk of debt

With non-recourse invoice factoring, the factoring company takes responsibility for the payment of the invoices. It isn’t easy for smaller businesses to access this type of factoring, and it will typically be more expensive, but it’s worth going for it if there’s a risk of your invoices not being paid.

3. Ability to plan better

By freeing up cash from your pending invoices, and reducing your risk of debt, you’ll be in a much better position to plan for the future of your business. What’s more, you’ll already have the cash to start turning your plans into a reality!

Disadvantages of invoice factoring

Invoice factoring offers plenty of advantages, but it’s not for everyone. Possible disadvantages include:

  • Cost
  • Potential loss of control
  • Long contracts

1. Cost

Invoice factoring is great for getting you your money, and getting it fast. But, it costs money. If you have reliable clients and aren’t worried by a few slow invoices, then you might get on better with alternative funding methods.

2. Loss of control

If you hand over the responsibility of actually chasing invoices to an external company, then you naturally lose some control over how you interact with your clients. A good invoice factoring company will always be highly professional in their interactions, but if you enjoy a personal relationship with your clients invoice discounting might be a better option for you.

3. Long contracts

While some invoice factoring companies are starting to offer shorter contracts, invoice factoring is generally a longer term commitment, rather than a ‘try it and see’ service. That needn’t be a problem, it’s just important to be aware of it and make sure you shop around first.

Invoice factoring vs invoice discounting

Most companies that offer invoice factoring will also offer invoice discounting. Both services are the same apart from one crucial difference: with invoice discounting, you are still responsible for chasing the invoice payment, as well as being responsible for the actual debt.

How to choose the best factoring company for your small business

While comparing rates online is useful, the best way to find the best factoring company for your small business is to compare a variety of quotes.

That’s where we can help.

Simply fill in this quick form to receive same-day quotes from up to four invoice factoring suppliers, completely obligation-free. The questions are designed to give us a clearer idea of your business, so we can get you the most accurate quotes possible.

The whole process only takes two minutes, and will save you both money and time. So, what are you waiting for?!

Rob Binns Expert Market
Rob Binns Senior Writer

Rob writes mainly about the payments industry, but also brings to the table industry-specific knowledge of CRM software, business loans, fulfilment, and invoice finance. When not exasperating his editor with bad puns, he can be found relaxing in a sunny (socially-distanced) corner, with a beer and a battered copy of Dostoevsky.

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