Invoice Finance Glossary & Guides
Invoice finance comes wrapped in more jargon than any funding product deserves. This hub gathers our plain English guides in one place, and beneath them sits a glossary of every term you are likely to meet in a quote, a fee schedule or a funder's small print. If a provider says something you cannot find here, ask us and we will translate.
Looking for a simple definition? Start with our guide to what invoice finance is, then use the glossary below for the detail.
Last reviewed: 6 August 2026
Deep-Dive Guides
What Is Invoice Finance?
The complete beginner's guide. What it is, how it works step by step, what it costs and who it suits.
Invoice Finance Costs & Rates
Service fees, discount charges and the small print charges that turn cheap headlines into expensive facilities.
Factoring vs Invoice Discounting
The two main types of invoice finance compared properly: cost, control, confidentiality and who each one suits.
How We Match You
What an invoice finance broker actually does, how our matching works and how we get paid.
Invoice Factoring
Funding plus credit control in one facility. The most popular route in for smaller and growing businesses.
Invoice Discounting
Funding only, with your credit control staying in house, and the option of complete confidentiality.
Selective Invoice Finance
Fund chosen customer accounts on an ongoing basis, rather than committing your whole sales ledger.
Confidential Invoice Finance
How a facility stays invisible to your customers, who qualifies and what it costs.
Working Capital Calculator
Two numbers and a slider show you roughly how much cash is sitting in your unpaid invoices.
The Invoice Finance Glossary
Every term below appears somewhere in the industry's quotes, agreements and fee schedules. The definitions are ours, written to be understood rather than to protect anybody's small print. Terms link to our fuller guides where one exists.
Advance rate (or prepayment percentage)
The percentage of an invoice's value the funder pays you up front, typically 70%–90% depending on your sector and customers. The remainder, minus fees, follows when your customer pays.
Approved invoices
Invoices the funder has accepted for funding. Invoices can be disapproved, and therefore not funded, for reasons such as disputes, age or exceeding a concentration limit.
Availability
The amount you can actually draw from your facility at any moment: your approved invoices multiplied by the advance rate, minus what you have already drawn.
Bad debt protection
Optional cover, included in non-recourse facilities, that protects you if a customer becomes insolvent and cannot pay. The loss falls on the funder rather than your business.
CHOCS (Client Handles Own Collections)
A halfway house between factoring and discounting: the facility is disclosed to customers, but your own team does the credit control rather than the funder's.
Concentration limit
A cap on how much of your funded ledger can be owed by a single customer. A funder might limit any one debtor to, say, 30% of the ledger, with invoices beyond that unfunded. Tolerance varies widely between providers.
Credit control
The work of chasing invoices to payment: statements, reminder calls and collections. Included in factoring, kept in house with invoice discounting.Read our full guide
Credit note dilution (or dilution)
The reduction of a ledger's value by credit notes, discounts, returns and disputes. High dilution makes funders cautious and can lower your advance rate.
Debtor
Your customer, in funder language: the business that owes the invoice.
Debtor days
The average time your customers take to pay, measured in days. The single biggest driver of how much cash is trapped in your ledger, and one of the two inputs in our working capital calculator.Read our full guide
Disclosed facility
A facility your customers know about, typically because invoices carry a notice directing payment to the funder. Standard factoring is disclosed. The opposite of a confidential facility.Read our full guide
Discount charge
The interest-like cost applied to the funds you have drawn, usually quoted as a margin over the Bank of England base rate. One of the two main charges, alongside the service fee. Covered fully in our costs guide.Read our full guide
Factoring
Invoice finance with credit control included: the funder advances against your invoices and collects payment from your customers. See our invoice factoring guide.Read our full guide
Funding limit
The maximum total funding a facility will provide, or the maximum against a single debtor. Reviewed as your business grows.
Invoice discounting
Invoice finance without the credit control: you borrow against your ledger while collecting your own invoices, often confidentially. See our invoice discounting guide.Read our full guide
Non-recourse
A facility that includes bad debt protection, so customer insolvency is the funder's loss. Costs more than recourse funding.
Notice period
How much warning you must give to exit a facility, commonly three months on annual contracts. Alongside minimum fees, the small print term that most affects what a facility truly costs.
Proof of delivery (POD)
The signed evidence that goods arrived. In sectors such as transport, PODs make invoices easy to verify, which supports higher advance rates.
Recourse
The standard arrangement: if a customer fails to pay within an agreed period, the invoice passes back to you and the advance is recovered. The alternative is non-recourse.
Refactoring charge (or collect-out fee)
An additional charge on invoices that remain unpaid beyond an agreed period, commonly 90 days, covering the funder's extra collection work.
Reserve
The portion of the invoice value not advanced up front, held by the funder and released to you, minus fees, when your customer pays.
Sales ledger
The complete record of what your customers owe you. Whole ledger facilities fund all of it; selective and spot facilities fund only the customers or invoices you choose.Read our full guide
Selective invoice finance
Funding for chosen customer accounts rather than your whole sales ledger. You nominate which debtors go into the facility and they are funded on an ongoing basis, with the rest of your ledger staying outside it. Usually structured as factoring applied to those accounts, and therefore priced with a service fee based on the turnover you put through, plus a discount charge. Beware: many providers also use the word 'selective' to describe invoice-by-invoice funding, which is properly called spot factoring and is priced very differently. See our selective invoice finance guide.Read our full guide
Service fee
The charge for running the facility, calculated as a percentage of your funded turnover. Higher for factoring, which includes credit control, lower for discounting. Covered fully in our costs guide.Read our full guide
Set-off
A customer's contractual right to reduce what they pay you against claims they have back, common in construction contracts. A key reason construction debt needs specialist funders.
Spot factoring (single invoice finance)
Funding for individual invoices, one transaction at a time, chosen as and when cash is needed. Priced per invoice on the invoice value and how long the customer takes to pay, usually with no service fee on turnover and no ongoing commitment. Distinct from selective invoice finance, which funds chosen customer accounts on an ongoing basis, although the two terms are often used interchangeably in the market.
Trust account
A collections account in your business's name but controlled by the funder, used in confidential facilities so customers pay "you" while receipts repay the funding invisibly.Read our full guide
Verification
The funder's check that an invoice is genuine and undisputed before funding it, ranging from spot checks to confirmation with your customer.
Whole turnover agreement (whole ledger)
A facility funding your entire sales ledger on an ongoing basis, the standard structure for factoring and discounting, as opposed to selective funding.
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Frequently asked questions
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