Best 6 invoice factoring companies for UK small businesses

Invoice factoring can free up vital cash for your business – but it can be hard to find a provider that suits your needs and will help you achieve your goals. Thankfully, we’ve done the research on the UK invoice factoring market and identified our top six picks for different stage businesses.

Our expert researchers have found that the best invoice factoring services are currently Optimum Finance, GapCap and the broker service Inspired Finance.

We’ll explain each of their merits, as well as the merits of a few other alternative options in this guide.

With business overheads proving a huge challenge in the cost of living crisis and economic downturn, invoice factoring can provide a vital lifeline for businesses needing access to ready cash. But, it’s essential to understand the fees and conditions involved before you commit.

You can use our free, no-obligation 🔍cost comparison tool to understand the likely invoice factoring fees for your business. To easily find a lender that suits your requirements, just select a few details about the needs of your business and we’ll connect you with top, trusted invoice factoring agencies.

In this guide, we’ll explain all you need to know about each of the invoice factoring services we’ve identified as great choices for a small business. Read on for more detailed insight into six of the best invoice factoring companies operating in the UK.

What is an invoice factoring company?

An invoice factoring company is a financial institution that assists businesses in managing their cash flow by purchasing their outstanding invoices.

It provides immediate access to cash when customers have been delayed in paying their invoices or there is a long payment plan before the full payment is received – allowing businesses to meet their financial obligations promptly, pay suppliers, and invest in growth opportunities. It also reduces the risk of bad debts by transferring credit risk to the factor.

By providing immediate access to cash, managing collections, and assuming credit risk, invoice factoring helps businesses improve their cash flow and maintain financial stability. For more information, we also have a guide to how much invoice factoring costs.

Best UK small business invoice factoring companies

Based on our research and analysis, the top three invoice factoring companies for small businesses in the UK are:

• Optimum Finance – This is a great choice for startups, there’s no minimum turnover required and Optimum is an SME specialist.
• GapCap – GapCap is a flexible lender that offers invoice factoring with no contract, and boasts excellent reviews.
• Inspired Finance – a great choice brokerage service that can help set your business up with comparable costs for invoice factoring.

These aren’t the only services around, of course. Click any of the below links to jump straight to our review summaries to learn more:

– Optimum Finance
– GapCap
– Inspired Finance
– Bibby Financial Services
– Hitachi Capital UK
– Skipton Business Finance

1. Optimum Finance

Optimum Finance

An SME specialist with bespoke solutions and no minimum turnover.

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Optimum Finance appointed Mike Jones as a Senior Relationship Manager (RM) in June of 2023. On their website, he stated:

“The enthusiasm of the team is immediately apparent and they are bringing this enthusiasm into their interactions with clients both new and old. I’m delighted to join the company and help them to help more SMEs to grow.”

The team behind Optimum boasts decades of business finance experience, and the lender explicitly bills itself as an SME specialist that offers bespoke solutions to a wide range of UK businesses.

One key selling point is that, unlike many lenders, Optimum Finance has no minimum turnover requirement, making it a great choice for startups that need extra funding.

It offers rapid access to up to 85% of the invoice amount, and, for an extra fee, can provide businesses with debtor protection.

This compensates Optimum clients in the event that their customers encounter financial difficulties and are unable to pay what they owe.

Invoice factoring customers also get access to E3, a real-time online system that means you can monitor your Optimum Finance account and sales ledger 24/7.

Unlike some lenders, Optimum Finance does not have a presence on a customer reviews website but it does have a rating of 4.6 on Google (albeit from 12 reviews). These reviews praise the company for being friendly, efficient and responsive.

2. GapCap

GapCap

A flexible provider with no contract and speedy application

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If you want to use invoice finance occasionally rather than making a firm commitment, then GapCap could be the ideal solution.

Through what it calls selective invoice finance, GapCap allows companies to raise money on upcoming invoices on an ad hoc, contract-free basis, a refreshing change from the binding contracts required by some providers.

The lender offers an advance of up to 85% of the invoice value and prides itself on a speedy application process, with most clients receiving an offer within 24 hours of application.

The company assigns a dedicated account manager to each client and, perhaps as a result, scores very highly on customer service, with an average of 4.8 on Trustpilot.

This is based on 78 reviews and the dedication and professionalism of the GapCap team comes up again and again – with one reviewer noting that he has his account manager on WhatsApp, and he replies day and night.

One thing to note is that, to be eligible for selective invoice finance, companies must have six months of trading history, so it’s not available to very early-stage startups.

3. Inspired Finance

Inspired Finance

A business finance broker with hands-on service who compare a range of providers

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Unlike the other companies on this list, Inspired Finance is not a lender. Instead, it’s a broker that specialises in invoice finance and other types of business funding.

It was founded in 2016 and, through the lenders on its platform, offers advance rates up to 100% and low rates from 0.1% (although this is obviously highly dependent on the circumstances of your business).

And it quickly made an impact, being shortlisted as Invoice Finance Broker of the Year at the 2019 Business Moneyfacts Awards.

Inspired Finance prides itself on providing a bespoke service – the company assesses your business’ specific requirements and introduces you to the most suitable funding option for your needs.

There’s no obligation and no risk, making this a good choice for businesses that need a bit of expert help on their funding journey.

4. Bibby Financial Services

Bibby Financial Services at a glance

Bibby has over 35 years of funding experience, global coverage and provides funding to over 7,000 businesses.

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Bibby Financial Services is one of the big hitters in the world of invoice finance, with a great track record and strong industry expertise in a variety of areas.

They offer bespoke funding solutions, and advance up to 100% of the invoice value within 24 hours.

The discount fee (essentially the interest you are charged on the advanced invoice) is typically 1-3.5% of the invoice amount, while the service fee (the amount you are charged for the invoice factoring service) is between 0.5% and 3.2% of your company’s annual turnover.

Bibby really stands out thanks to its scale – it provides funding to over 7,000 businesses and has experience and insight in sectors including construction finance, recruitment, manufacturing, and wholesale.

It also has an unrivalled track record. The company was founded in 1982, and boasts that it has been funding its longest-standing client since 1989.

Having stayed in business for over three decades, it’s no surprise that Bibby has an excellent reputation when it comes to customer service.

It has an average rating of 4.7 on Trustpilot, and is praised for its professionalism and hands-on approach, with some reviewers discussing how they have used the company for over a decade.

Bibby offers its services with an unlimited duration on a rolling contract, gives customers access to a 24/7 online account service, and offers Bad Debt Protection, which – for an extra fee – means Bibby clients won’t be out of pocket if one of their payees encounters financial difficulties.

Given its dominant market position, Bibby can afford to be selective with its client list.

Businesses have to have an annual turnover of over £100,000 to be eligible, so smaller SMEs may need to look elsewhere for their business funding.

5. Hitachi Capital UK

Hitachi Capital

An award-winning provider with a one-fee structure and a 6-month trial period.

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When looking at invoice factoring from Hitachi Capital UK, one thing immediately stands out.

They were named the Best Factoring and Invoice Discounting provider at the 2019 Business Moneyfacts awards, the UK’s largest business finance awards ceremony. So they must be doing something right.

They currently support over 800 SMEs and have 25 years experience of funding businesses.

Hitachi Capital UK advances up to 90% of the invoice value and offers two fee structures.

Their standard invoice factoring product operates on typical terms, with a service fee that is a percentage of company turnover, and a discount fee that is a percentage of the amount lent.

However, Hitachi also offers a product called Inspired Cashflow, a comprehensive invoice factoring solution that charges a simple fee of between 0.45% and 5% of the company’s annual turnover.

This means no hidden fees and no set up costs, and is a great option for any SME that is put off by the complicated fee structures of other providers.

Refreshingly, Hitachi is one of the few invoice factoring companies to offer a six-month trial period to see if invoice factoring is the right fit for your small business.

After this, you’ll be offered a rolling monthly contract, perfect for SMEs put off by lengthy contracts.

This provider also scores highly for customer service, with an average Feefo score of 4.3. However, there are only seven reviews left during the past year, and one of these criticises the lack of communication between different departments at the company.

Also remember the usual caveat with Feefo, customers can only leave a review if invited to do so, so the company being reviewed has more control over the process than with sites like Trustpilot.

In terms of eligibility, Hitachi states that its services are suitable for businesses with a minimum annual turnover of £50,000.

However, they also stress that they assess each business individually, and will consider startups, especially if they are homeowners.

6. Skipton Business Finance

Skipton Business Finance

A business with clear online fees, dedicated relationship manager and a variety of products

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Skipton Business Finance was founded in 2001 but is part of Skipton Building Society, a financial institution that’s been going since 1853.

This, Skipton argues, gives it a different perspective, with the company stating that it’s “focussed on understanding its clients’ businesses and assisting in creating wealth and jobs in the regions, rather than purely for profit.”

They advance up to 90% of the invoice value, and give each client a dedicated relationship manager.

A wide variety of invoice finance options are available, including My White Label, a business solution that combines invoice finance with professional credit control in a completely confidential package that will leave your customers none the wiser.

Another interesting option is Skipton Select, which offers what Skipton calls interest-free invoice factoring.

Essentially, you simply pay a flat fee that’s a percentage of your annual turnover and Skipton is admirably up front about these, publishing the following table on its website.

Skipton is also open to startup businesses. It lists no minimum turnover and has a specific section on its website that addresses Invoice Finance for a New Start Business.

How does an invoice factoring company work?

When a business sells its products or services on credit terms and issues invoices to its customers, it may experience a delay in receiving payment. This delay can impact the business’s cash flow and hinder its ability to meet immediate financial obligations or invest in growth.

To overcome this challenge, the business can turn to an invoice factoring company. The company evaluates the creditworthiness of the business’s customers and, based on their assessment, offers to purchase the outstanding invoices.

Upon purchasing the invoices, the factor assumes the responsibility of collecting payment from the customers. They handle the collection process, including sending payment reminders and following up on outstanding invoices. Once the customers make payment, the factor deducts their fees and any advances provided, and remits the remaining balance to the business.

By providing immediate access to cash, managing collections, and assuming credit risk, invoice factoring helps businesses improve their cash flow and maintain financial stability.

What types of businesses are invoice factories companies suitable for?

Invoice factoring companies are suitable for businesses of different sizes and industries that encounter cash flow challenges due to slow-paying customers. Whether it’s startups, service-based firms, or companies facing seasonal or growth-related cash flow issues, invoice factoring offers a viable solution to improve liquidity and support ongoing operations.

Small businesses and startups can benefit from invoice factoring to improve cash flow and access working capital for day-to-day operations and expansion. Shockingly, 22% of small business owners were willing to do nothing while clients remained unpaying this year – but this is a terrible long-term strategy as it could lead to a multitude of cash-flow and supply chain issues.

Service-based businesses, such as consulting firms or marketing agencies, can use invoice factoring to bridge the gap between invoicing clients and receiving payments.

And businesses in seasonal industries would definitely benefit from invoice factoring to manage cash flow fluctuations throughout the year.

Top UK invoice factoring companies: side-by-side comparison

What to look out for when choosing an invoice factoring company?

As you can see, there’s a lot to consider when choosing the right invoice factoring company for your small business.

For some expert help, simply use our free 🔍cost comparison tool to receive bespoke quotes from some of the UK’s top invoice factoring companies, all tailored to the specific needs of your business.

Invoice factoring companies: making the best choice for your business

There’s no doubt that finding the right invoice factoring solution can make a huge difference to your small business.

A recent report by Nerdwallet showed that while around 35% of invoices were less than a month overdue, and 27% were between one and three months late, an alarming 20% of business owners reported having outstanding invoices from four to six months ago.

However, there’s more to picking the right provider than just choosing the one that provides the lowest fees.

Carefully consider the pros and cons of providers, including the quality of their general customer service, whether you’ll be assigned a dedicated account manager, their level of expertise in your sector, and whether they are used to the challenges associated with small business finance.

If you need invoice factoring for your construction or recruitment business, then make sure to check out our in-depth guides to construction finance and the best recruitment factoring companies.

It’s also vital to get a range of quotes from different providers so, to get started, simply fill out the 🔍cost comparison tool to receive bespoke invoice factoring offers, all tailored to the specific needs of your small business.