The Growth Guarantee Scheme can support invoice finance — releasing the cash tied up in unpaid invoices so you don’t have to wait for customer payment terms. Your receivables effectively provide the security, the government guarantee reduces the lender’s risk to improve access, and you can choose between factoring (lender manages collections) and confidential invoice discounting. Apply through an accredited lender that offers invoice finance under the scheme.
Key takeaways
- Invoice finance is one of the scheme’s supported facility types.
- It unlocks cash tied up in unpaid invoices to smooth cash flow.
- Factoring includes collections; invoice discounting is usually confidential.
- Your invoices effectively provide the security for the facility.
- Your principal private residence cannot be taken as security under the scheme.
- Costs are a service fee plus a discount charge — compare across lenders.
For established businesses that sell to other businesses on credit terms, cash regularly sits locked up in unpaid invoices for weeks at a time. Invoice finance turns those receivables into available cash — and under the Growth Guarantee Scheme, it can be delivered with a government guarantee that improves access. This guide explains how scheme-backed invoice finance works, the difference between factoring and discounting, how the guarantee applies, and how to apply.
What is invoice finance?
Invoice finance lets you access a large proportion of the value of your unpaid customer invoices straight away, rather than waiting 30, 60 or 90 days for payment. The lender advances funds against your invoices and is repaid when your customers pay, with the balance (less fees) released to you at that point. It is a flexible working-capital tool that grows with your sales — the more you invoice, the more funding it can release.
How the scheme applies
The mechanism mirrors the scheme’s other facilities. The government provides the accredited lender with a partial guarantee against the outstanding balance, reducing the lender’s risk and encouraging it to support viable businesses. The invoice finance itself behaves as normal; the guarantee operates behind the scenes between the lender and the British Business Bank. You remain fully liable, and the guarantee improves access rather than reducing what you owe.
Factoring vs invoice discounting
There are two main forms of invoice finance, and the right one depends on how you want collections handled:
| Feature | Factoring | Invoice discounting |
|---|---|---|
| Who collects payment | The lender manages collections | You retain control of collections |
| Customer visibility | Customers may be aware | Usually confidential |
| Best for | Businesses wanting credit-control support | Businesses wanting discretion and control |
Both release cash from invoices; the choice comes down to whether you want the lender to handle collections and whether confidentiality matters to your customer relationships.
Who it suits
Invoice finance is well suited to established businesses that invoice other businesses on credit terms and regularly have significant sums tied up in receivables — for example wholesalers, manufacturers, recruiters and service firms. If a gap between delivering work and being paid puts pressure on your cash flow, invoice finance is designed to bridge it.
Cost and security
Costs typically comprise a service fee plus a discount charge on the funds advanced, set by the accredited lender. The invoices themselves effectively provide the security for the facility, and whether any additional security or personal guarantee is required is at the lender’s discretion. Under the scheme, your principal private residence cannot be taken as security. As with all scheme facilities, the guarantee improves access rather than guaranteeing a lower cost, so compare the total cost across accredited lenders.
Because invoice finance grows with your sales ledger, it can be a particularly good fit for businesses scaling up and needing working capital to keep pace.
Will customers know?
This is a common concern. With confidential invoice discounting, your customers typically deal with you exactly as before and need not know a facility is in place. With factoring, the lender’s involvement in collections may be visible, though reputable providers handle customer contact professionally. If discretion matters to you, discounting is usually the route; if you would value credit-control support, factoring may suit.
How to apply
- Review your sales ledger and the cash tied up in unpaid invoices.
- Find accredited lenders that offer invoice finance under the scheme (or use a broker).
- Prepare recent accounts, management figures and details of your debtors.
- Apply, and let the lender assess your receivables and business.
- Compare the facility’s total cost and terms before accepting.
The bottom line
Scheme-backed invoice finance is a flexible way for established, credit-selling businesses to unlock the cash trapped in unpaid invoices, improving cash flow with the added benefit of a government guarantee that improves access. Choose between factoring and confidential discounting to suit your customer relationships, compare the total cost across accredited lenders, and apply through a lender that offers invoice finance under the scheme to keep your working capital moving.
Frequently asked questions
Does the Growth Guarantee Scheme support invoice finance?
Yes. Invoice finance is one of the facility types the scheme can support, alongside term loans, overdrafts and asset finance. It lets businesses release cash tied up in unpaid invoices, with a government guarantee reducing the lender’s risk.
What is invoice finance?
Invoice finance lets you access a large proportion of the value of unpaid customer invoices straight away, rather than waiting for payment terms to elapse. The lender advances funds against your invoices and is repaid when your customers pay, smoothing cash flow.
What is the difference between factoring and invoice discounting?
With factoring, the lender also manages collection of the invoices, and customers may be aware of the arrangement. With invoice discounting, you retain control of collections and it is usually confidential. Both release cash from invoices; the difference is who chases payment and visibility.
How does the government guarantee apply to invoice finance?
As with other facilities, the government provides the accredited lender with a partial guarantee against the outstanding balance, reducing its risk. The invoice finance works as normal; the guarantee operates behind the scenes between the lender and the British Business Bank.
How much of an invoice can I access?
Lenders typically advance a large proportion of each invoice’s value upfront, with the balance (less fees) released when the customer pays. The exact percentage depends on the lender, your customers and your circumstances.
Is invoice finance good for cash flow?
Yes. It is specifically designed to improve cash flow by unlocking money tied up in unpaid invoices, which is valuable for businesses that sell on credit terms and face a gap between delivering work and being paid.
Who is invoice finance suitable for?
It suits established businesses that invoice other businesses on credit terms — for example wholesalers, manufacturers, recruiters and service firms — where a significant amount of cash is regularly tied up in receivables.
What does invoice finance cost?
Costs typically include a service fee plus a discount charge on the funds advanced, set by the accredited lender. The guarantee improves access rather than guaranteeing a lower cost, so compare the total cost across lenders.
Is invoice finance secured on my invoices?
The invoices (your receivables) effectively provide security for the facility. Whether any additional security or personal guarantee is required is at the lender’s discretion, though under the scheme your principal private residence cannot be taken as security.
Will my customers know I use invoice finance?
It depends on the type. Factoring may be visible to customers because the lender manages collections; invoice discounting is usually confidential, so customers need not know. Choose the structure that suits your customer relationships.
Can I finance all my invoices or just some?
Arrangements vary — some facilities cover your whole sales ledger, others allow selective invoice finance against chosen invoices. Discuss which approach fits your needs with the accredited lender.
Does invoice finance affect my customer relationships?
With confidential invoice discounting, customers typically deal with you as usual. With factoring, the lender’s involvement in collections can affect the experience, though reputable providers handle this professionally. Consider this when choosing the structure.
Is approval guaranteed under the scheme?
No. The lender assesses your business, your sales ledger and your customers within the scheme rules. The guarantee can support a viable application but does not switch off underwriting.
How do I apply for scheme-backed invoice finance?
You apply through an accredited lender that offers invoice finance under the scheme, or use a broker to identify suitable lenders. The lender assesses your receivables and business and, if approved, sets out the facility terms.
Ready to compare your options?
Get a free, no-obligation quote in about two minutes — soft search only, no impact on your credit score.
Get your free quoteThis article is general information, not financial advice. Eligibility, rates and terms vary by lender and your circumstances. The Loans Hub is a finance broker, not a lender.
