What is invoice discounting?

Last updated: 29 September 2026

Invoice discounting allows UK businesses to raise working capital against unpaid customer invoices while continuing to manage their own credit control and customer relationships. The lender advances an agreed percentage of eligible invoices and releases the remaining balance, less fees, when customers pay. Facilities are commonly confidential, so customers may not know they are being used.

Invoice Discounting vs Invoice Factoring

Invoice Discounting Invoice Factoring
Who runs credit control? You The funder
Do customers know? Usually not (confidential) Usually yes (confidential options exist)
Typical advance 85-90% 85-90%
Best suited to Established businesses with in-house credit control Newer or growing businesses wanting collections handled for them
Cost Usually lower Usually higher (credit control included)

If you don’t have your own credit control team, invoice factoring may be a better fit. If you only need occasional funding, see single invoice finance.

How Much Does Invoice Discounting Cost?

Invoice discounting usually has two main costs:

  • A monthly service fee, the minimum fee the funder requires to make the facility financially viable, often set as a percentage of turnover.
  • A discounting fee, the interest charged only on the funds you actually draw, similar to an overdraft.

Some facilities also include optional bad debt protection, insuring you against customers who fail to pay. The exact pricing depends on your turnover, the quality of your customers, your payment terms and your credit control history.

Try it first: certain funders on our lending panel will allow you to trial an invoice discounting facility for up to six months. You can leave at any time with no exit fee, and at the end of the trial you would switch to a rolling contract.

Who is Invoice Discounting Suitable For?

Invoice discounting is usually a good fit if your business:

  • sells to other businesses (B2B) on credit terms of 30-90 days
  • has an established trading history and steady turnover
  • has reliable in-house credit control
  • wants to keep its finance arrangements confidential
  • needs working capital that grows with sales, to take on bigger contracts, fund stock or pay suppliers early

It is not suitable for businesses selling to consumers, or where invoices are raised before the work is done.

Case study: see how we arranged a £200,000 invoice discounting facility for a growing fencing and security company to keep taking on new contracts while paying suppliers on time.

Confidential Invoice Discounting

Confidential invoice discounting is the most common form. Your customers pay you as normal and never deal with the funder, so your relationships stay exactly as they are. Some funders also offer disclosed invoice discounting, where customers are notified, which can mean slightly better terms or easier approval for some businesses.

Why Use a Broker for Invoice Discounting?

Invoice discounting providers vary widely in pricing, contract terms, minimum turnover, sector appetite and security requirements. With eight years’ experience in invoice finance and access to a wide panel of funders, from major banks to specialist independent lenders, Wise Factoring compares the market for you and negotiates terms, including trial periods and no-exit-fee options, so you don’t have to approach funders one by one.

Summary of Benefits

It allows immediate access to a portion of the funds tied up in unpaid invoices, improving liquidity and enabling businesses to cover expenses, invest in growth, or seize opportunities.

Businesses maintain control over their sales ledger and client relationships. They continue to handle invoice collection, which can be advantageous for maintaining customer relationships and preserving confidentiality.

Invoice discounting is typically a confidential arrangement. Unlike factoring, where the third-party contacts customers directly, with discounting, the customer might not be aware of the financing arrangement between the business and the lender.

The funding obtained through invoice discounting grows in line with the business’s sales, providing a flexible source of finance that adapts to the company’s needs.

By accessing funds tied up in unpaid invoices, businesses can reduce financial stress caused by extended payment terms or late-paying customers. This stability contributes to better financial planning and management.

While there are fees associated with invoice discounting, the costs can be lower compared to other forms of borrowing, making it a cost-effective way to access working capital.

As a business grows and generates more invoices, the available funding through invoice discounting also increases, making it a scalable financial solution.

Accessing cash through invoice discounting can help a business meet financial obligations promptly, potentially improving its creditworthiness and ability to negotiate better terms with suppliers or lenders.

These advantages make invoice discounting an attractive financing option for businesses looking to optimise cash flow while retaining control over their sales ledger and customer relationships.

Invoice Discounting Case Studies

Invoice Discounting FAQs

What is invoice discounting in simple terms?

It is a way to borrow money against your unpaid invoices. A funder advances most of the invoice value upfront, you collect payment from your customer as usual, and the funder releases the rest, less fees, when your customer pays.

Is invoice discounting confidential?

Usually, yes. With confidential invoice discounting your customers are not told that a funder is involved, and you continue to manage collections yourself.

How much can I borrow with invoice discounting?

Typically 85-90% of the value of your approved invoices. The facility limit grows as your sales ledger grows.

What is the difference between invoice discounting and invoice factoring?

With invoice discounting, you keep control of credit control and it is usually confidential. With factoring, the funder manages collections on your behalf. Discounting generally suits more established businesses, while factoring often suits newer or growing businesses.

How much does invoice discounting cost?

Usually a monthly service fee plus a discounting fee (interest) on the funds you use. Pricing depends on your turnover, customers and payment terms. Some funders on our panel offer a trial of up to six months with no exit fee.

Will I need to give a personal guarantee?

Many funders ask for a personal guarantee or indemnity from the directors, but requirements vary. We can help you find funders whose security requirements suit you.

How quickly can an invoice discounting facility be set up?

Often within a week or two, depending on how quickly you send over the requested information. It also depends on the funder’s due diligence. Once the facility is live, funds against new invoices can usually be released within 24 hours.

Can I switch from invoice factoring to invoice discounting?

Yes. Many businesses move from factoring to invoice discounting as they grow and build their own credit control. We can help you manage the switch.

Will the funder take security over my business?

Usually yes. The funder will normally take a debenture, a legal charge over your invoices, so it can recover what it is owed if the business ceases trading.

Need a Confidential Invoice Discounting Facility?

Speak to Wise Factoring about your turnover, customers and funding needs, and we’ll compare invoice discounting options across our lending panel for you.

Every application is subject to individual assessment and funder approval.

See our video below on the difference between Invoice Factoring and Invoice Discounting:

Our Other Invoice Finance Services

Business owner using a calculator and laptop to manage invoices and cash flow

Invoice Factoring

Invoice Factoring is a popular choice for newly established or growing businesses. The funder will advance between 85%-90% of the invoice value and manages the credit control on your behalf, confidentially if required.

Healthcare worker assisting an elderly patient, representing healthcare staffing businesses supported by Wise Factoring

Single Invoice Financing

Single invoice finance, also known as Spot Factoring, allows you to receive an advance against single or selected invoices. This can be used as and when required, without the need for any long-term commitment.

Woman using a calculator for some calculations

Revolving Credit Facilities

A flexible alternative to traditional business loans or invoice finance. Draw funds when required, repay them and potentially use the facility again. Options are available for SMEs through to larger established businesses.

Construction workers walking across a bridge on a large infrastructure project

Construction Finance

In the construction industry, Construction Finance is used to release cash against your applications for payment or payment certificates. It can also be used in other industries that receive staged or milestone payments throughout the term of a contract.

Business team smiling during a meeting to discuss company growth and funding options

Switching Funder

If your Invoice Finance facility is due for renewal, it’s worth reviewing your fees, service levels, funding amount and concentration limits to see if there is a better deal, or a more suited facility on offer in the market.