Fixed sum versus revolving availability
A term loan gives you a defined amount today and a repayment schedule. Availability does not change as you grow, so a fast-growing business often outgrows the facility within a year and has to re-apply.
Invoice finance is revolving: availability is a percentage of the approved sales ledger, so it rises automatically as you invoice more. For businesses whose cash problem is growth rather than a one-off cost, that is decisive.
Which problem are you solving?
Use a term loan for one-off, capitalisable spend: an acquisition, a fit-out, a hire, entering a new market, or consolidating expensive short-term debt. Repayment comes out of future trading profit.
Use invoice finance where the money is already earned but locked in 30 to 90 day payment terms, where you are funding payroll and suppliers ahead of customer settlement, or where a single large contract would otherwise strand your cash.
Cost, speed and control
Term loans are often cheaper on drawn funds but you pay interest on the whole balance whether or not it is needed. Invoice finance charges only on what you draw, plus a service fee on turnover, and typically funds within one to three weeks against four or more for a term facility.
The control question matters too: disclosed factoring involves the funder in collections, confidential discounting does not. Where customer relationships are sensitive, that shapes the choice more than price does.
Using both
Many businesses run both: invoice finance to carry day-to-day working capital and a term loan for discrete investment. Lenders will need to agree the security position between them, which is a normal part of structuring rather than an obstacle.
Frequently asked questions
Which is easier to obtain?
Invoice finance is usually easier for a young or loss-making business, because the underwriting weight sits on the quality of your customers rather than your own balance sheet.
Can I have both at the same time?
Yes, subject to the lenders agreeing how security ranks. It is a common structure for growing businesses.
Which is cheaper?
On a drawn basis a term loan is usually cheaper, but invoice finance charges only on what you use and scales with sales, which often makes it better value in practice.
Last reviewed: 2026-08-15