If your business has been turned away by a bank or traditional lender, invoice finance could be the solution you have been looking for, and your credit score matters far less than you might think.
Most invoice finance providers do consider your credit history, but not all of them weigh it the same way. Some specialist providers of invoice finance for businesses with bad credit are lenient, particularly if your business is registered, actively trades and has strong unpaid invoices from creditworthy customers. In such cases, the strength of your sales ledger is more important than your past financial record.
This guide explains everything you need to know about bad credit invoice finance, from how it works and who qualifies to how to compare providers and find the best deal.
Key takeaways
Invoice finance bad credit solutions allow businesses with poor credit histories to access cash from unpaid invoices.
Invoice finance approval is based on your customer’s creditworthiness, not yours, which makes it one of the most accessible forms of business finance.
You can receive up to 80% to 95% of an invoice’s value within 24 to 48 hours.
It is available for limited companies, sole traders and partnerships operating on a B2B basis.
Invoice factoring and invoice discounting are the two main types of invoice finance, each suited to different business needs.
Using a comparison platform like ComparedBusiness UK helps you find the best invoice finance providers at the best rates.
Get Best Invoice Factoring Providers Quotes
What Is Bad Credit Invoice Finance?
Bad credit invoice finance is a form of financing that lets you release money tied up in your unpaid invoices, even if your business has a poor credit history.
Instead of waiting for 30, 60, or even 90 days for customers to settle their accounts, a specialist invoice finance provider advances you a significant portion of the invoice value upfront.
The key difference between invoice finance and a traditional business bank loan is where the focus lies. For bank loans, they will go through your credit file, your personal finances and your track record of repayments.
An invoice finance provider’s primary interest is in the quality of your unpaid invoices and the creditworthiness of your customers. In simple words, if your customers have a strong credit history, you have a strong chance of getting financed, even if you have a bad credit history.
This makes invoice finance a bad credit solution and a strong contender for UK businesses that have struggled to access conventional funding.
How Does Bad Credit Invoice Finance Work?
The process of invoice finance for businesses with bad credit is the same as it is for other businesses. Here is how it works in practice:
- You issue an invoice to a customer as usual, with agreed payment terms.
- You then submit that invoice to an invoice finance provider.
- The provider then advances 80% to 95% of the invoice value, typically within 24 to 48 hours.
- Once your customer pays back, you receive the remaining balance minus the provider’s service fee.
Can Businesses With Bad Credit Get Invoice Finance?
This is a question that almost every small and medium-sized business asks. The answer is that yes, as long as several basic conditions are met,
When people ask, ‘can I get invoice finance with a bad credit score?’, the answer is almost always yes, provided you meet a few basic criteria.
Leading invoice finance providers in the UK market understand that businesses can go through a rough patch of late payments or experience a seasonal dip in revenue, but such information does not tell the whole story of your business.
Here are four core reasons why invoice finance is different from other types of lending when it comes to credit history:
- Customer Credit Focus Approach: The invoice finance providers assess the creditworthiness of customers who owe you money. If your customers have a strong credit profile, you are likely to be approved.
- No Hard Credit Check: Many invoice finance providers only do a soft credit check on your business, meaning it will not affect your credit score.
- Bad Credit History Does Not Affect Application: With invoice finance defaults, missed payments, and even previous insolvency (in some cases) are not a barrier to approval.
- Funding Scales With Your Business: As your business grows and you issue more invoices, your available funding grows with it.
Want to unlock your unpaid invoices?
Use ComparedBusiness UK to get multiple quotes from leading invoice finance providers within minutes.
How Does Invoice Finance Work for Businesses With Bad Credit?
The process of accessing invoice finance with bad credit is largely the same as it would be for a business with a strong credit history. Here are the five core steps:
Step 1: Application
You will have to get in touch with a reputable invoice finance provider or use a comparison platform like ComparedBusiness UK to receive quotes from multiple providers at once.
Once you have finalised an invoice finance provider, you will need to provide them with basic business information, details about your invoicing volumes and information about your customers.
Step 2: Due Diligence
The invoice finance provider will assess the creditworthiness of your customers rather than focusing on your business credit score.
They will look at your debtor book, essentially, the customers who owe you money and evaluate how reliable those customers are.
Step 3: Facility Setup
Once approved, the invoice provider will set up an invoice finance facility. This outlines the details of the advance rate, the service fee and the discount rate charged for the period the invoice remains unpaid.
Step 4: Submit Invoices
You issue invoices to your customers as usual and then submit those to the invoice finance providers. The provider disburses an advance equal to 80% to 95% of the invoice face value as agreed, and the funds usually arrive in the account within 24 to 48 hours.
Step 5: Customer Payment And Settlement
Once your customer pays the invoice, the provider releases the remaining balance to you after deducting their service fee. With invoice discounting, your customers pay you directly, but with invoice factoring, the lender may collect payment on your behalf.
Example:
You issue a £10,000 invoice to a reliable B2B customer with 60-day payment terms.
The lender advances up to 90% of the invoice value upfront, so you receive £9,000 within 24 hours.
After 60 days, your customer pays the full £10,000 to the invoice finance provider.
The provider deducts their service fee (approximately £120) and the discount charge (approximately £80).
You get the remaining balance of £800.
Total received: £9,800
Who Is Eligible For Bad Credit Invoice Finance?
Invoice finance is available to a wide range of UK businesses, but it does have some eligibility criteria. Here is a clear breakdown of who qualifies for this funding:
Businesses that can apply are:
- Sole traders
- Partnerships
- Limited companies
- Startups with unpaid invoices
Key characteristics that make a business a strong candidate for invoice finance are:
- You work on a business-to-business (B2B) basis and regularly issue invoices.
- Your invoices have payment terms of 30, 60, or 90 days.
- Your customers have a strong credit history.
- You need fast access to working capital to cover payroll, supplier payments or business growth.
Industries That Use Invoice Finance In The UK:
1. Recruitment and staffing agencies
3. Creative industries and marketing agencies
6. Accounting firms and accountants
How To Compare Invoice Finance Providers In The UK?
Not all invoice finance providers are the same, and this is especially true when you are looking for bad credit invoice finance.
High-street banks rarely offer funding to businesses with poor credit. Reputable invoice finance providers specifically build their services for businesses with bad credit.
Here is what to look for when comparing invoice finance providers:
1. Advance Rate
The first thing you need to consider is the advance rate, which is the percentage of each invoice that the provider will advance upfront. The rates typically range from 80% to 95%. A higher advance rate means you have more working capital available right away.
2. Fee Structure
The invoice finance providers charge in two ways:
- Service Fee: The percentage (usually 0.5% to 3% of your invoice value) charged to manage the facility.
- Discount Rate: The daily or monthly interest charge applied to the amount advanced for as long as the invoice remains unpaid.
Always ask the invoice finance provider for a clear, detailed breakdown of all the costs before signing the contract. Look out for hidden charges such as termination fees, minimum usage fees, or audit charges.
Want to learn about invoice finance cost in more detail? Then read our invoice finance cost guide.
3. Bad Credit Track Record
Look for invoice finance providers that clearly state they work with bad credit applicants. Reputable invoice finance providers in the industry have experience working with businesses with bad credit histories.
4. Contract Terms
Some invoice finance providers require long-term contracts of a minimum of 12 to 24 months, while others offer more flexible and rolling arrangements. For a business with uncertain cash flow, it is better to go with a provider that offers a flexible contract.
5. Minimum Invoice Volume Requirements
Some providers have a minimum threshold for invoice size or the number of invoices per month. Make sure the invoice finance provider you choose has requirements that align with your invoicing patterns.
6. Customer Service
When your business is going through a difficult financial period, responsive and quick support from your invoice finance provider is essential. Choose a provider with a strong reputation for communication and customer support.
Pro Tip: Using a comparison platform like ComparedBusiness UK saves time and increases your chances of approval.
Rather than applying to providers one by one, a comparison service connects you with multiple leading invoice finance providers at once. It is free, fast, and searching does not affect your credit score.
Find The Best Bad Credit Invoice Finance Provider With ComparedBusiness UK
At ComparedBusiness UK, we make it easy for businesses with bad credit histories to find the best invoice finance provider. Our free comparison service platform connects you with leading invoice finance providers in the UK who understand bad credit and are ready to help your business with cash flow challenges.
Here is why UK businesses with a bad credit history use ComparedBusiness UK:
- Free To Use: There are no fees for using our comparison service, and you are under no pressure to accept any quote.
- Multiple Quotes: We compare quotes from a wide range of trusted specialist invoice finance providers, saving you hours of research.
- Experience with Bad Credit: We work with invoice finance providers who work with businesses that have a bad credit history.
- Transparent: We compare providers and outline all the details clearly, so you can make an informed decision.
Want to improve your business cash flow? Just fill in our quick quote form, and we will connect you with leading invoice finance providers.
FAQs
In most cases, no. Many invoice finance providers carry out only a soft credit check during the application process, which does not appear on your credit file. Also, using a comparison platform like ComparedBusiness UK to compare providers does not impact your credit score.
Most invoice finance providers can advance funds within 24 to 48 hours of submitting an invoice. The initial setup of a facility may take a few days, but once it is in place, the team typically processes all the ongoing advances very quickly.
Yes, sole traders are eligible for bad credit invoice finance. As long as you operate on a B2B basis and issue invoices to other businesses with payment terms, you can apply. The invoice finance providers assess your customer creditworthiness rather than your personal credit history.
