Yes, it is possible to sell unpaid invoices in the UK. If the invoice isn’t yet overdue, you can sell it to a factoring company, which usually advances 70% to 90% of its value within a few days and pays the remainder, minus its fees, once your customer pays.
If the invoice is significantly overdue or disputed, factoring companies usually won’t buy it from you. Your options then are to sell the debt to a debt buyer at a discount or send it to a debt collection agency.
| Your Invoice Is | Best Route | What You Get |
|---|---|---|
|
Not yet due |
Invoice factoring (spot or whole ledger) |
70% to 90% upfront, the balance minus fees later |
|
A few weeks overdue |
Spot factoring, with some providers |
A lower advance and a higher fee |
|
Months overdue or disputed |
Debt buyer or collection agency |
A fraction of face value, or what is recovered minus commission |
|
Owed by an insolvent customer |
A claim in the insolvency |
Factors, and most buyers won't take it |
Key Takeaways
- Selling unpaid invoices is a realistic option: Your business does not have to wait 30-90 days for customers to pay. Instead, sell the unpaid completed invoices to get access to working capital with the help of a financing provider.
- Three types of buyers: Your main options are factoring companies, invoice discounting firms, and online invoice marketplaces.
- Process of selling unpaid invoices: It works in simple steps. First, identify which invoices to sell, then choose the right buyer and submit the invoices for review. Once confirmed, receive the advance sum and hand over the invoices to the provider.
- Eligibility requirements: You need a stable business credit history, UK registration, and completed invoices that are not already factored.
- Selling unpaid invoices is different from taking a loan: your invoices are your assets, and selling them simply means selling your accounts receivable. It does not count as a loan in your books because there is no interest involved.
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Can You Sell Unpaid Invoices In The UK?
Yes. When you sell an invoice, you transfer your right to be paid to somebody else. In legal terms, the transaction is an assignment of the debt. For a legal assignment, the transfer must be in writing and signed by you, and you must give your customer written notice that they should now pay the buyer (Law of Property Act 1925, section 136).
The name of the transaction depends on who is buying the invoice and when:
- Invoice Factoring: Selling invoices that are not yet overdue to a factoring company. This is the answer to the question, ‘What is it called when you sell outstanding invoices to a third party?’
- Spot Factoring (or selective invoice factoring, or single invoice finance): Selling just one invoice, or a couple of them, rather than your whole sales ledger.
- Debt Sale or Debt Purchase: Selling an overdue debt to a debt buyer, usually at a substantial discount.
Your customer’s consent is generally not required. Even if your agreement with them contains a clause prohibiting assignment, the Business Contract Terms (Assignment of Receivables) Regulations 2018 make that prohibition ineffective in most business contracts concluded since 22 November 2018 where the supplier is a small or medium-sized business.
Exceptions apply, so discuss your situation with the buyer or a solicitor if your contract includes such a clause.
Who Buys Unpaid Invoices?
Here is who buys unpaid invoices:
1. Factoring Companies
Factoring companies buy your invoices, pay you most of the amount upfront, and collect payments from your customers. Most offer whole-ledger factoring, which is a rolling contract for selling all your invoices. Check our list of the top invoice factoring companies in the UK.
2. Spot Factoring Providers
If you only need to sell one invoice, spot factoring lets you do so without signing a long-term contract. For instance, Novuna Business Cash Flow can advance up to 90% of the invoice value within 24 to 72 hours. Spot factoring usually costs more per invoice than a whole-ledger facility.
3. Invoice Trading Platforms
Online platforms let investors or funders bid on individual invoices. They work in a similar way to spot factoring and are typically only available to limited companies with creditworthy business customers.
4. Debt Buyers
Debt buyers buy overdue debts outright. You receive a one-off payment, considerably below the invoice value, and the buyer takes on the risk and the responsibility for recovery. This option is the realistic solution if the invoice is several months past due.
5. Debt Collection Agencies
Most collection agencies do not buy invoices. Instead, they recover the debt on your behalf, often on a ‘no collection, no fee’ basis, and keep a percentage of the amount collected. The debt still belongs to you until it is paid off. Some agencies also buy debts, so you should clarify which service they are offering.
Invoice discounting is not selling. With invoice discounting, you borrow against your invoices and collect them yourself. It is a valuable alternative, but the invoices stay yours.
How To Sell An Unpaid Invoice: A Step-By-Step Process
- Check that the invoice can be sold. It should be for goods or services delivered and accepted by your customer and not disputed. If you have a bank debenture or another invoice finance facility, you might need to get that lender’s approval.
- Collect your documentation. Gather the invoice, your contract or purchase order, proof of delivery, and any emails where the customer accepted the work or committed to pay.
- Get quotes. Compare the advance rate, all the fees, whether the arrangement is recourse or non-recourse, and whether your customer will be informed.
- Let the buyer vet your customer. The buyer will assess your customer’s creditworthiness, since the money will ultimately come from them.
- Sign the agreement. Your invoice is assigned to the buyer, and your customer is instructed to pay the buyer, unless it is a confidential arrangement.
- Receive payment. You get the advance, which normally arrives within days. Once your customer pays, the buyer sends you the rest minus its fees.
How Much Will You Get For An Unpaid Invoice?
When it comes to factoring, you get most of the value of your invoice. According to Funding Circle, factoring typically costs 1% to 5% of the invoice value in total. That cost includes:
| Charge | What It Is | Typical Level |
|---|---|---|
|
Advance |
The share of the invoice paid upfront |
70% to 90% of the invoice value |
|
Service fee |
For managing the invoices and collecting payment |
0.5% to 3% of the invoice value |
|
Discount charge |
Interest is charged on the money advanced until your customer pays. |
1.5% to 5% a year |
|
Other fees |
Setup, admin, audit or credit check fees |
Varies; ask for them in writing. |
A Worked Example:
You sell a £10,000 invoice that your customer pays after 45 days. The advance is 85%, the service fee is 2%, and the discount charge is 5% per year.
| Step | Amount |
|---|---|
|
Advance Paid to You Upfront (85%) |
£8,500.00 |
|
Service Fee (2% of £10,000) |
-£200.00 |
|
Discount Charge (5% a year on £8,500 for 45 days) |
-£52.40 |
|
Balance Released When Your Customer Pays |
£1,247.60 |
|
Total You Receive |
£9,747.60 |
|
Total Cost |
£252.40 (about 2.5%) |
For a full breakdown, see our guide to the costs associated with invoice factoring. Selling an overdue debt is totally different. Debt buyers pay a fraction of the face value, and the older the debt and the weaker the documentation, the lower the price. No debt buyer publishes standard rates, so get the offer in writing.
Can You Sell Overdue Invoices?
Yes, but the older the invoice, the fewer options you have. Some spot factoring providers can still fund an invoice that is a few weeks late, though you will usually get a lower advance and pay a higher fee.
Most factoring companies will not buy invoices that are several months overdue, as the risk that they will never be paid is too high. At that point, a debt buyer or a collection agency is the realistic route.
Before selling or handing over an overdue invoice, work out what you are legally entitled to. Under the Late Payment of Commercial Debts (Interest) Act 1998, a business customer who pays late owes you:
- Statutory interest of 8% plus the Bank of England base rate. With the Bank of England base rate currently at 3.75%, that is 11.75% a year, unless your contract sets a different rate.
- A fixed recovery sum of £40 for debts under £1,000, £70 for debts of £1,000 to £9,999.99, and £100 for debts of £10,000 and above.
For example, a £10,000 invoice paid 60 days late carries about £193 in interest plus the £100 fixed recovery sum. These sums are part of the debt, so they are transferred to the buyer and increase its value.
Don’t wait too long. In England and Wales, you generally have 6 years from the date payment was due to take legal action over an unpaid invoice (5 years in Scotland). After that, the debt becomes virtually worthless to a buyer.
Selling To A Debt Buyer Vs Using A Collection Agency
Here is a quick comparison:
| Factor | Debt Buyer | Debt Collection Agency |
|---|---|---|
|
Who Owns The Debt |
The Buyer |
You |
|
What You Get |
A one-off payment, well below face value |
What is recovered, minus commission. |
|
When You Get Paid |
When the sale completes |
Only if and when the customer pays |
|
Risk Of Non-Payment |
Passes to the buyer |
Stays with you |
|
Best For |
Old debts you want off your books |
Debts you expect can still be recovered |
If you want to keep doing business with this customer, consider both options carefully, as each involves a third party contacting your customer about the outstanding payment.
Recourse Vs Non-Recourse: Who Takes The Loss?
With recourse factoring, the risk remains with you: If your customer fails to pay, you will be required to repay the advance or replace the invoice with another one. It is the cheaper and more common option.
With non-recourse factoring, the factoring company bears the loss if your customer can’t pay because they become insolvent. The fees are higher, and the cover usually does not apply to disputes over the goods or services provided.
Will My Customer Know You’ve Sold The Invoice?
With standard (disclosed) factoring, yes. Your customer is told to pay the factoring company, and the factoring company collects the money from them.
However, if you do not want your customers to know, consider a confidential arrangement. With confidential invoice discounting, you continue to collect the payments yourself, and you do not tell your customers.
Some providers also offer confidential factoring, where they take care of your sales ledger in your name. Confidential arrangements are usually only offered to businesses with higher turnover and tight credit control.
How to qualify for selling unpaid invoices
There are no strict rules for being eligible to sell invoices for cash. However, you must adhere to the following if you want a reliable partner in the UK:
- Your business should have a stable credit history. Buyers will evaluate your financial standing to ensure you’re a reliable business.
- The creditworthiness of your customers is crucial. Buyers prefer invoices from customers with a strong payment history, as it reduces the risk of non-payment.
- The invoices should be due within a reasonable timeframe (at least 30 days generally) and not already pledged as collateral.
- Your business should be legally registered in the UK. Compliance with UK financial regulations is required.
- Some buyers may have a minimum or maximum invoice value requirement, so ensure your invoices meet these thresholds.
Pros And Cons Of Selling Unpaid Invoices
Here are the pros and cons of selling unpaid invoices:
Pros:
- Faster Cash: You receive most of the invoice value within a few days instead of waiting 30 to 90 days.
- Funding Grows With Your Sales: The more you invoice, the more you can draw.
- Less Chasing: With factoring, the provider collects payments for you.
- Bad-Debt Protection: Possible with non-recourse factoring.
Cons:
- Cost: You give up a share of the invoice value in fees.
- Your Customers May Know: Unless you choose a confidential arrangement.
- The Risk May Remain: With recourse factoring, you have to return the advance if your customer fails to pay.
- Contractual Obligations: Whole-ledger facilities usually come with a minimum term and a notice period.
- Overdue Debts Sell Cheaply: A debt buyer pays well below the face value of the invoice.
How To Stop Invoices Going Unpaid
Selling invoices resolves a cash flow problem, but preventing late payment saves you the fees. There are several steps you can take:
- Agree on payment terms in writing before starting the work. If none are agreed, payment becomes due 30 days after the customer receives the invoice or the goods or service are delivered, whichever is later.
- Check new customers’ credit before offering them terms.
- Issue invoices promptly, with a clear due date and payment instructions.
- Chase payments on a fixed schedule, and let customers know that you will charge statutory interest on late payments.
Changes in the law are also underway. The Commercial Payments Bill, introduced to Parliament in May 2026, proposes a maximum payment period of 60 days between businesses and would make interest of 8% above the base rate mandatory on late payments. The 60-day cap is not expected to apply before 2027.
Alternatives To Selling Your Invoices
- Invoice Discounting: Borrow against your invoices and continue collecting them yourself. Read our invoice discounting guide.
- Merchant Cash Advance: If you take card payments, receive cash now and pay it back through your future card sales. Find out what every small business owner needs to know about merchant cash advances.
- Short-Term Business Loan: Fixed repayments, not linked to your invoices.
Not sure selling is right for you? Read our guide on whether selling accounts receivable is right for your business.
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FAQs
One efficient approach is invoice factoring, where you sell your unpaid invoices to a factoring company and give them a fee for it. The factoring company advances you most of the invoice value up front and collects payment from the customer itself.
Most of the payment terms are extended from 30 to 90 days although this can vary from one industry to another. This means the customer has a maximum of 90 days to pay the invoices for the goods and services bought from the supplier.
Some of the best ways to collect unpaid invoices are sending consistent payment reminders, offering incentives like discounts for early payments and enforcing late fees. Invoice factoring is another good approach to getting immediate cash from outstanding invoices.
