Receivables and invoice finance

Receivables finance suits B2B businesses that invoice on credit terms and want to accelerate cash collection without waiting for customers to pay in the ordinary course. It is particularly effective for companies experiencing rapid growth, where the working capital tied up in a lengthening sales ledger grows faster than retained profits can fund it.

It is less relevant for businesses that trade mainly with consumers or on immediate payment terms, since there is no receivable of meaningful duration to finance. Sectors with strong ledger quality — recruitment, distribution, business services and manufacturing among them — are well represented in this market, though the underlying requirement is a genuine, collectable trade debt rather than the sector itself.

Under confidential invoice discounting, a business raises an invoice as normal and the funder advances a percentage of its value, typically 80–90 per cent, with the balance released, less fees, once the customer pays; the arrangement is not disclosed to customers. Factoring works similarly but the funder takes over collection of the ledger, which means customers are aware of the arrangement.

Selective or single-invoice finance allows individual invoices to be funded rather than the whole ledger, useful for businesses with a small number of large contracts. Non-recourse structures add credit protection, so if an approved customer becomes insolvent the funder — not the business — absorbs the loss, generally at a higher cost than a recourse facility.

Funders focus heavily on the quality and spread of the debtor book: concentration in one or two customers, high dispute or credit-note rates, or long payment terms all reduce the advance rate a funder will offer. A ledger with diversified, creditworthy customers paying reliably within agreed terms supports higher advance rates and lower fees.

Because the facility is secured against the receivable itself rather than general company assets, receivables finance can be accessed by businesses with limited fixed assets or a shorter trading history than would be required for unsecured lending, provided the ledger itself is sound and properly evidenced through invoicing and delivery records.

Pricing typically comprises a discount charge on funds drawn, expressed as a margin over a reference rate, and a separate service or administration fee calculated on ledger turnover, usually a fraction of a per cent. Non-recourse and credit-insured structures carry an additional premium reflecting the transferred credit risk.

Total cost is driven primarily by ledger quality, average invoice value and customer concentration, plus whether the business requires disclosed factoring with collections support or confidential discounting where it retains its own credit control function. Smaller or newer businesses, and those with higher customer concentration, should expect pricing towards the upper end of the typical range.

GFG reviews the debtor ledger, ageing profile and customer concentration alongside recent management accounts to identify which funders are likely to offer the best combination of advance rate and cost for the specific ledger. Where non-recourse cover is relevant, GFG also considers credit insurance availability for key customers.

Because underwriting is ledger-led rather than solely balance-sheet led, indicative terms can often be produced quickly once ledger data is available, with facilities typically live within three to five weeks. GFG's role concludes once the facility is drawn and its fee, payable only at that point, reflects the funding secured.