How invoice discounting works, and what it costs

Invoice discounting lends you up to 90% of your unpaid business invoices while you keep chasing them yourself, and your customers are not told. It is built for businesses turning over £300,000 a year or more (NatWest's published floor), and no major provider publishes its fees, so the quote you get is the only price there is.

Figures checked 1 November 2026 on each provider's own site.

Invoice discounting explained

You keep issuing invoices and collecting payment as normal. Each time you raise one, the lender makes most of its value available to draw; when the customer pays into a bank account the lender controls, the advance is cleared and the remainder, less charges, comes back to you. Close Brothers describes its version as confidential because you keep control of collections. That is the whole difference from invoice factoring, where the provider runs your sales ledger and your customers deal with it directly.

How does invoice discounting work, step by step?

The lender audits your sales ledger and sets a facility limit and an advance rate.
You upload invoices or a ledger report, often daily; NatWest and RBS clients do this through FacFlow.
You draw cash up to the available amount; NatWest says within 24 hours.
Customers pay into an account the lender controls; it clears your advance and releases the rest.
Charges are deducted: the service fee on invoices assigned, the discount charge on money drawn.

Invoice discounting fees and charges

Charge	How it works
Service fee	Percentage charged for managing the facility
Discount charge	Charge for using the money advanced, similar to overdraft interest
Minimum fee	Minimum charge as a percentage of invoices assigned over an agreed period
Disbursements	Extra charge for services outside standard fees, such as same-day payments or legal letters

Definitions from Bibby Financial Services' own glossary. Fee levels: Not published by Bibby, Close Brothers or NatWest.

Cost of invoice discounting: a worked example

Take a business at Close Brothers' published minimum of £750,000 a year, whose customers pay in 45 days on average.

Invoices outstanding at any time: £750,000 × 45/365 = £92,466
Available at 90%: £83,219
Service fee: every 0.1% of turnover = £750 a year
Discount charge, Bank Rate part (3.75%) on £83,219 drawn all year: £3,120.72
Each 1 point of margin over Bank Rate: £832.19 a year

The point of the arithmetic: the service fee is charged on turnover, the discount charge only on what you draw. A business that draws the facility in full all year pays mostly discount charge; one that keeps it as a standby pays mostly service fee and, if usage is low, the minimum fee. Ask for both numbers in writing and run them through these lines before you sign. At NatWest's lower £300,000 a year minimum the same maths gives only about £33,288 of headroom, so at that size we would price a selective facility or an overdraft first.

Invoice discounting facility terms to check

Contract length and notice matter as much as price. Bibby's brochure offers 12 or 24 month contracts, or a rolling contract with 30 days notice, and its glossary puts notice at usually up to 3 months. NatWest says security may be required; ask exactly what, and whether directors must sign personal guarantees. Close Brothers and NatWest publish no contract length at all. Ask for the termination fee in pounds, not as a formula.

Advantages and disadvantages of invoice discounting

For it: confidentiality, cash tied to sales rather than a fixed loan limit, and you keep your own customer relationships. Against it: the turnover floor shuts out most small firms, you pay on every invoice whether you need the cash that month or not, and you should expect regular audits of your ledger. If you are below £300,000 a year, start with selective invoice finance providers instead.

Invoice discounting companies

Provider	Advance	Minimum turnover	Pricing
NatWest / RBS Invoice Finance	Up to 90% within 24 hours	£300,000 a year	Not published
Close Brothers Invoice Finance	Up to 90%	£750,000 a year	Not published
Bibby Financial Services	Up to 95%	Not published	Not published

More providers, including selective lenders, are in our invoice finance providers comparison and the Bibby review.

No invoices? Card-takings finance instead

Invoice discounting only works for business-to-business sales. If your customers pay by card, a merchant cash advance is repaid from those takings instead; see how the two compare in invoice finance vs merchant cash advance.

Want funding priced against your card takings?

Leave your details and we will come back with what an advance would cost, as a fee in pounds. Free, no obligation.

Taking cards as well? A free statement review shows whether you are overpaying on processing. All options are on the business funding hub.

Invoice discounting questions

What is the definition of invoice discounting?

Invoice discounting is borrowing against your unpaid business invoices while you keep running credit control yourself. The British Business Bank describes it as similar to factoring, but you keep control of customer payments, so customers normally never know a lender is involved.

What are the charges for invoice discounting?

Expect a service fee (a percentage of the invoices you put through), a discount charge on the money you actually draw, a minimum fee if you use the facility less than agreed, and disbursements for extras such as same-day payments. Close Brothers says each agreement is individually priced and NatWest only that product fees may apply; neither publishes a rate.

How much can I borrow with invoice discounting?

Up to about 90% of the invoices outstanding at any time, not of annual turnover. A £750,000 business whose customers pay in 45 days has about £92,466 of invoices on the ledger, so roughly £83,219 available.

What are the disadvantages of invoice discounting?

It is only open to larger businesses (Close Brothers' published minimum is £750,000 a year, NatWest's £300,000 a year), you pay a service fee on every invoice for the life of the contract, minimum fees apply if you draw less than expected, and leaving needs notice: Bibby's glossary says usually up to 3 months.

Which companies offer invoice discounting in the UK?

NatWest (through RBS Invoice Finance and its FacFlow platform), Close Brothers Invoice Finance, and Bibby Financial Services all offer it. Selective providers such as Triver fund single invoices instead and suit smaller firms.

Sources

Every figure on this page comes from the provider's own website or terms, or a named primary source, read on 1 November 2026. Where a provider does not publish a term we say "Not published" rather than fill the gap from a comparison site.