TL;DR: Setting up a new invoice factoring facility typically takes between five and ten working days. Once the account is active, businesses can often access funds from individual invoices within 24 hours. Failure to meet repayments or customer defaults could put your business assets at risk.

How long does it take to get funded through invoice factoring?

For many UK businesses, cash flow is the engine that drives growth. When that engine stalls because of late-paying customers, invoice factoring often appears as a viable solution. One of the most common questions business owners ask is: how long does it take to get funded through invoice factoring? The answer depends on whether you are setting up a brand-new facility or seeking a drawdown from an existing one.

In the UK, the initial setup process generally takes between one and two weeks. However, once your business is “onboarded” with a provider, the speed of funding increases significantly. This guide explores the timelines involved, the factors that can speed up or slow down your application, and how to ensure you receive your funds as quickly as possible.

The two stages of invoice factoring speed

To understand the timeline, it is helpful to look at invoice factoring in two distinct phases: the initial setup and the ongoing funding cycle.

1. The Initial Setup (5 to 10 working days)

If you have never used invoice factoring before, the provider must perform due diligence on your company and your customers (debtors). This involves reviewing your financial history, checking the creditworthiness of your clients, and verifying that your invoices are valid. This stage typically takes about a week, though complex cases or incomplete paperwork can extend this to 15 working days.

2. Ongoing Funding (24 to 48 hours)

Once your facility is live, the speed changes. When you raise a new invoice for a customer, you simply upload it to the factoring provider’s portal. In most cases, the provider will advance a percentage of the invoice value (usually 80% to 90%) within one business day. Some providers even offer “same-day” funding if the invoice is submitted before a certain cut-off time, such as 10:00 AM.

What happens during the application process?

The reason the initial setup takes a few days is that the lender is essentially taking on the risk of your unpaid invoices. Unlike a traditional bank loan, where the focus is solely on your credit score, factoring providers look closely at the quality of your customers.

The process usually follows these steps:

• Initial Inquiry: You provide basic details about your annual turnover and the value of your outstanding invoices.
• Indicative Quote: The provider gives an estimate of the rates and the advance percentage.
• Due Diligence and Audit: The provider may visit your premises or conduct a virtual audit to check your ledger and internal processes.
• Credit Checks: The lender will check your credit report and those of your main debtors. Get your free credit search here. It’s free for 30 days and costs £14.99 per month thereafter if you don’t cancel it. You can cancel at anytime. (Ad)
• Facility Offer: A formal agreement is sent for signature.
• First Drawdown: Your first batch of invoices is funded.

Factors that influence how long it takes to get funded

While the averages are well-established, several variables can influence the speed of your funding. Understanding these can help you manage your expectations and prepare your business for a smoother transition.

Accuracy of Documentation

The most common cause of delay is missing or inaccurate paperwork. To speed up the process, you should have your last three to six months of bank statements, your latest set of accounts, and a current debtor age analysis report ready. If the lender has to keep asking for additional files, the setup time will inevitably stretch beyond the standard ten days.

The Quality of Your Debtors

Invoice factoring relies on your customers paying their bills. If your customers have poor credit ratings or a history of very late payments, the provider may take longer to decide whether to fund those specific invoices. In some cases, they may decline to fund invoices from specific “high-risk” customers altogether.

Your Industry

Some industries are inherently more complex for factoring providers. For example, construction often involves “stage payments” or “pro-forma invoices,” which are harder to verify than a simple delivery of goods. If your business operates in a sector with complex billing cycles, the due diligence phase might take longer as the provider seeks to understand the contractual risks involved.

How to speed up your invoice factoring application

If you need cash quickly, there are steps you can take to ensure the process moves at the faster end of the spectrum. Transparency and preparation are key when dealing with any financial service provider in the UK.

First, ensure your accounting software is up to date. Providers prefer businesses that use modern, cloud-based accounting systems because it makes verifying invoices much faster. Second, be honest about any previous financial difficulties or existing debentures on your business. Discovering these late in the process can cause a lender to pause the application.

Finally, choose the right type of factoring. “Spot factoring” (factoring a single invoice) can sometimes be faster to set up than a “whole-ledger” facility, though it often comes with higher fees. You can find more information about different types of business finance on the British Business Bank website.

Benefits and risks of invoice factoring

While the speed of funding is a major benefit, it is important to weigh the advantages against the potential risks. Invoice factoring is a powerful tool for managing working capital, but it is not without its obligations.

Benefits:

• Improves cash flow by unlocking money tied up in unpaid invoices.
• Can grow alongside your business; as your sales increase, so does your available funding.
• Often includes a collections service, meaning the provider handles the “chasing” of payments.

Risks:

• Your business is generally still liable for the debt if the customer fails to pay (this is known as recourse factoring).
• It can be more expensive than a traditional bank loan due to service fees and interest.
• Some customers may prefer to deal directly with you rather than a third-party credit controller.

It is also worth noting that if you use business assets or property as additional security for a finance facility, your property may be at risk if repayments are not made. Failure to adhere to the terms of a finance agreement could lead to legal action, repossession, increased interest rates, and additional charges.

People also asked

What is the difference between invoice factoring and invoice discounting?

Invoice factoring involves the lender managing your sales ledger and collecting payments directly from your customers, whereas invoice discounting allows you to maintain control over collections while the facility remains confidential.

Can I get invoice factoring if I have a new business?

Yes, many providers offer facilities to startups, provided you have creditworthy business-to-business (B2B) customers and a clear trail of completed work or delivered goods.

Do I have to factor all of my invoices?

This depends on the contract; whole-ledger factoring requires you to fund all eligible invoices, while selective or spot factoring allows you to choose specific invoices or customers to fund.

What happens if my customer never pays the invoice?

In a recourse factoring agreement, you must pay back the advanced funds to the lender if the customer defaults; in a non-recourse agreement, the lender may absorb the loss, usually for a higher fee.

Will my customers know I am using invoice factoring?

Yes, in standard factoring, the provider contacts your customers for payment, making the arrangement transparent. If you require privacy, you might consider confidential invoice discounting instead.

Final thoughts on funding timelines

When asking how long does it take to get funded through invoice factoring, the answer is usually measured in days, not months. For a business facing a cash flow squeeze, the transition from a ten-day setup to 24-hour funding cycles can be transformative. By preparing your documentation in advance and maintaining a clean sales ledger, you can minimise delays and ensure your business has the liquidity it needs to thrive.

Always remember to read the terms of any financial agreement carefully. While invoice factoring can provide a fast injection of capital, it works best when used as part of a long-term financial strategy rather than a desperate measure. Ensure you understand the total cost of the facility, including service fees and discount rates, before committing to a provider.