Thankfully many of the ways to ensure a strong cash flow are in your own hands as a business owner. And one of the many important ways to ensure this is cash flow finance!

Building robust business routines from the get-go to help healthy cash flow is very important. Here’s a checklist to get you started on the right path.

Invoicing

• Check that every invoice is accurate before it leaves the building. Errors create disputes. Disputes create delays. Delays kill cash flow.
• Show payment terms on every invoice, including the actual due date, not just “30 days” but the specific date by which payment must arrive.

Credit notes

• Monitor the volume and value of credit notes you raise. Anything above 2–3% of invoice value is a signal of a systemic problem in your invoicing, your delivery, or both.
• Segment credit notes by reason. Patterns point to root causes that can be fixed.
• Require one named person to authorise every credit note. It introduces accountability and reduces any casual use.

Debt performance

• Set debtor day targets and review them at every board meeting.
• Implement a trigger so if your overdue debt profile deteriorates past a defined point, action is automatic.
• Benchmark your performance against sector norms.

Commission

• A sale is not a sale until it is paid for. Pay sales commission on paid invoices, not invoiced amounts.

Insurance

• Credit insurance can really help, especially if you have a cluster of customers that disproportionately represent your ledger.
• Look at specialist cover for export debts because the consequences can be harder to manage in places where you don’t have a ‘footprint’.

Credit

• Have a robust credit control policy detailing important milestones, such as when debts are chased and when you are start looking at legal remedies.
• Issue statements at the same intervals every month. They should be routine and regular.
• Maintain a very accurate ledger. Make it a daily routine if you need to.  An accurate ledger is the foundation of accurate collection.
• Back up your sales ledger every night. You can’t collect if you don’t have the data.

Escalate

• Have systems set up with your legal advisers to escalate without delay. Dealing with escalation promptly shows you mean business. This is especially important for international payments. Have international legal reach and capabilities in place before you do business abroad.

But staying close to costs maintains visibility, allowing you to make informed decisions and keep the business on solid footing. Often, the simplest disciplines are what allow a business to thrive over time.

With that in mind, we have compiled a list to get you back to thinking about the basics and what you can do to help your business, especially in today’s climate.

Don’t automatically reach for a loan

Taking out a loan costs money. Sometimes it costs more money than you initially think it will. And once you are in, you are in the for the long haul. Plus, you might be paying a loan to sustain costs that you don’t actually need to have. Before you sign on the dotted line, take a look at what you are spending. But of even greater importance is to look at how you can get your invoices paid on time and how alternative funding solutions may be the answer (We might be able to help you here!). Your cash flow is the most important source of funding you have. Because it’s your own money.

Review those costs that seem fixed and forever

When did you last renegotiate your leases? Or perhaps review your utility suppliers and tariffs? Even small changes like moving to LED lightbulbs can make big savings over the long term.

Subscriptions

These can really add up over a year. Software, trade bodies, online services…you name it.  The list can be long. You might even have some that are not being used at all anymore! Take stock and reduce the list to what the business needs right now, not what the business wants.

People and suppliers

Looking after our people and our suppliers are a vital part of thriving. Because they all work together to help us deliver for our customers. So, before we hire another person, think about how we can reorganise to give our existing team more responsibility and more money in their pocket. If we paid our suppliers early what more could they do for us in the long term? If we bought wholesale and not retail how much could we keep in our pocket?

Marketing

Before committing to paid advertising, review what you already have. A well-managed social media presence and a consistent programme of useful content will often reach more of the right audience than a paid advertisement, at a fraction of the cost. If your website content management system is accessible to your team, update the site yourself.

Make it a habit and keep a checklist

Don’t be afraid to have a habit of reviewing costs across the business and asking the question ‘How can we do that more efficiently? Create your own checklist and keep adding to it. You’ll be amazed at how much it can add up.

Here’s a few things ideas we have seen:

• Get interest on your money by setting up a sweeps account
• Renegotiate your lease or rent
• Check out alternatives for utilities
• Got spare space? Consider a short term let to a new or small business
• If you have things in storage have a good clear out making sure to keep records that are legally important to keep
• Look at your subscriptions to publications, groups and organisations. Are they essential to the business or just magazines gathering dust uncreased and unloved?
• Send one person to that seminar or conference and get them to do a show and tell to everyone back at base.
• Do you use consultants? Consider what they actually add. Perhaps contact your local university’s business school.
• Find a cheaper insurance quote
• Right size office supplies. Do you need everything you are ordering?
• Are you really using all the office equipment you have on lease? Can you downsize that copier or go down to one all-purpose copier for example?
• Do you really use all the features of and phone lines on your system?
• What expensive telephone conference calls can be done on cheaper video calls?
• How can you trade time and expertise with suppliers instead of cash? You may be surprised how much you can help each other with no money changing hands
• Does your agency have to do all your website updates? Get access to the admin system behind your site and write your own updates.
• Cut the advertising and get social. You may be able to reach more customers via LinkedIn than from a magazine. Undertake a full audit of your marketing and test alternatives.
• Print off less and store digitally more
• Look at the packaging your suppliers use – if you can reduce their costs they will pass it on to you.
• Buy recycled printer cartridges
• Cut your lighting bill with motion detectors on infrequently used spaces
• Use freelancers more. Anything bought retail – can you buy it wholesale?
• Car share more on business trips.

Got some more to add to the list? Let us know and we’ll share them!

After all you have not been paid so they remain your property don’t they? It can get complicated and that’s where a Retention of Title clause in your Terms and Conditions is absolutely essential.

What is a Retention of Title clause?

A Retention of Title (ROT) clause is also sometimes known as a Romalpa clause after the case law that established the principle. Its purpose is to ensure that ownership of the goods ONLY passes to the buyer after full payment has been received.

This can be of utmost importance in a situation where the buyer becomes insolvent as it can remove those goods specifically from any insolvency proceedings, because they would never have been legally owned by the seller.

‘All Sums Due’

You can go one stage further and have an ‘All Sums Due’ clause. This will allow you to recover all goods supplied to the value of the outstanding balance.

Limitations

Unfortunately, an ROT clause is not always easily enforceable. Your goods must be clearly identifiable and not permanently incorporated into something else. It can also become tricky to apply in the case of services, unless there is clearly identifiable intellectual property involved, for example.

Preparation is key

Make sure that your ROT clause is agreed in advance and forms part of your Terms and Conditions that are clearly communicated to your customers. Obtain legal advice on your Terms and Conditions to ensure you know that they are utterly robust. Adding an ROT to a delivery note, for example, will most likely mean that it cannot be enforced.

Late payment still applies

Don’t forget that the fact that you have had to effect your ROT clause inherently means that you have not been paid. Therefore, late payment interest and compensation under the Late Payment Act are still due.

Prevention and preparation ensure that you thrive

ROT is a tool to be used when things don’t go to plan. But it is no substitute for thorough credit vetting at the outset. Make sure you are completely clear about the risks of doing business with a particular business before you start.

But always late causes problems. If another business is always paying late, they are effectively using your business, and others probably, as their unofficial banker.

But paying late is an own goal in so many ways. Let’s explore this and look at what paying promptly can positively achieve for every business.

Great suppliers don’t grow on trees

Your great service is directly linked to your supply chain’s ability to deliver to you. Paying them promptly is your signal that you value them. That can be repaid to you in many different ways. They may:

• Prioritise your orders when timescales are tight,
• Flag problems early,
• Extend better terms,
• Bring you opportunities before they go to someone else.
• Cut you some slack when cash flow is tight,
• Give you more favourable prices.

Trust and support are built, not expected

The above list is a fantastic wish list of things everyone needs in business. That is because they all strengthen your competitive advantage. In the long term, competitive advantage is one of the key ingredients that ensures that your business will thrive.

Have a prompt payment culture

There have been many initiatives over the last 20 years or so to encourage businesses to pay promptly. Many centre around a ‘code’ or ‘policy’. What it boils down to is having a top to bottom commitment to prompt payment as your business culture. Here’s some sage advice that has been dispensed on the subject over the years:

• Have a top management policy on prompt payment of bills.
• Ensure that all staff are aware of it, especially but not only those in finance and purchasing.
  
• Agree terms of payment at the start of all contracts.
  
• Monitor your payment system regularly for timely payment of invoices.
  
• Have a good system for clearing disputes quickly.
  
• Foster good relationships with suppliers by informing them of your payment procedures and who is responsible.
  
• Meet your suppliers and engage with them through your shared business goals. Create a common purpose.

Break the chain

You may be under pressure to pay late because you are being paid late. This game of payment ‘pass the parcel’ is hard to step away from. But that is where we may be able to help you by making money available to you sooner, using your outstanding invoices.Talk to us to see how we can help.

Not every business survives. But it is important that you manage your exposure to the risk from other businesses becoming insolvent in order for you to continue to thrive. It’s all about being alert for the signs and maintaining rules routines in your business to ensure that you are actively managing the risks.

Here’s a rundown of things to keep on top of, which we call the ‘Five Cs’

Control credit

Make sure you have a clear credit control system which details how you will deal with overdue invoices. Not only does it ensure that you get paid as quickly as you can but it will flag problem customers. Remember, credit limits are yours to give and not customers to expect ,so don’t extend them without very good reason. Keep a constant eye on your aged debtors report. Payments that gradually slow, requests to extend credit terms, changes in the people you deal with, erratic ordering patterns, a contact who becomes unusually hard to reach – any of these individually might mean little. Don’t be afraid to act before a problem arises.

Clear Contracts

Have clear Terms of Trade in place which govern your relationship with your customers. They will be worth their weight in gold if things go wrong. For example, a properly drafted retention of title clause in your Terms and Conditions means your goods remain your legal property until they’re paid for. If a customer becomes insolvent before paying, you may be able to recover the goods directly, ahead of the insolvency process, provided they remain identifiable and haven’t been incorporated into something else.

Credit checking

Buying a report from a leading credit referencing agency may mean a little outlay before you start trading with a business, but it is a good investment. Forewarned is forearmed. Better to have your eyes fully open than to walk into a problem.

Credit insurance

Credit insurance protects against bad debts. Premiums are typically a percentage of insured turnover, and cover can apply to domestic debts, export debts, or both. For businesses with significant exposure to a small number of large customers, it can be the difference between a painful but manageable loss and a business catastrophe. In addition to helping you reduce the risks of non-payment, the credit insurer will undertake some of the credit checking process.

Cash flow resilience

Businesses that manage their cash flow actively, collecting promptly, using invoice finance to maintain liquidity, keeping working capital healthy, are better placed to absorb a customer insolvency without it cascading into their own financial difficulty. The headroom that good cash flow management creates isn’t just about funding growth. It’s also about having the resilience to handle the unexpected.

The idea behind it is to make sure that businesses have the right to be compensated if they are paid late. Being paid late restricts working capital availability, may mean that businesses have to borrow unnecessarily and can potentially restrict growth or even endanger businesses.

Let’s have a look at your business’ rights to late payment interest and compensation and how you can use the legislation to your benefit.

What does the Act allow me to do?

The Late Payment of Commercial Debts (Interest) Act allows UK businesses and public sector organisations to claim interest and compensation if they are paid late.

What constitutes being paid late?

Businesses are entitled to claim when a debt remains unpaid after the date specified on the contract. In the absence of a contract, late is deemed to be 30 days after the date of the invoice.

What interest can I charge?

Where a business-to-business contract doesn’t specify an interest rate for late payment, the Act applies a statutory rate of 8% above the Bank of England base rate, calculated from the day after payment was due.

What compensation can I charge?

In addition to interest, businesses are entitled to a fixed compensation payment for the cost of recovering the debt. The entitlement works on a scale as follows:

Size of unpaid debt	Sum to be paid to the creditor
Up to £999.99	£40.00
£1,000.00 to £9,999.99	£70.00
£10,000.00 or more	£100.00

 

A maximum of £100 can be claimed for each overdue debt. It can only be charged once, per debt and not per invoice. The distinction is important where several invoices are issued to chase one debt.

What happens if I have a contract with a customer that has a different compensation remedy?

If your terms and conditions specify a different interest rate for late payment, that rate applies instead, provided it’s not unreasonably punitive.

How do I exercise my rights to interest and compensation?

State your business’ intention to use its entitlement in all credit management documentation. This includes credit application forms, order confirmations, invoices, contracts, Terms of Trade, credit collection letters and e-mails. The following wording may be considered for businesses wishing to use their right to late payment interest and compensation:

“We understand and will exercise our statutory right to claim interest and compensation for debt recovery costs under the Late Payment legislation if we are not paid according to our agreed credit terms.”

How do I make a claim for interest and compensation?

Add interest and compensation to a revised invoice or set it out in a separate letter. State the original invoice amount, the due date, the date payment was received (or the current date if still unpaid), the interest calculated at the applicable rate, and the fixed compensation amount.

What happens if a customer partly pays an invoice?

Interest will keep accumulating on the unpaid amount.

What happens if I am concerned about the repercussions of claiming my rights?

Many customers pay promptly once they understand the claim is legally grounded and will be enforced. However, the Statute of Limitations applies to the Act, so you have six years to make the claim.

Is there anything new on the horizon?

The Act was never meant to be a ‘cure all’ for late payment, but rather to give businesses another tool in their credit management kit. However, in the King’s Speech at the opening of Parliament in May 2026, plans were announced for the Small Business Protections (Late Payments) Bill. Amongst other things this new legislation would make it illegal in the UK to sign payments terms in excess of 60 days, with mandatory interest to be applied to late paid invoices. This is very new and not law yet, so keep in the loop for developments.

The list is endless and some are more important than others. We would argue that the first two examples above are some of the most important. Good credit management is the discipline that directly impacts your ability to get paid on time consistently, so that your cash is in your bank account as quickly as possible.

Here’s a rundown of some key ongoing business disciplines that are important in good credit management.

80/20 rule

The 80/20 rule states that a small number of customers typically account for the majority of your revenue. This 20% concentration deserve the most of your attention. Know the people in their finance teams, visit them, understand their payment cycles, and make sure you’re seen as a priority supplier rather than just another creditor. The remaining 80% are still important. But good procedures will be your bedrock for success, such as accurate and timely invoicing, credit vetting, clear and agreed Terms and Conditions.

Negotiate Terms of Trade at the point of sale

Raising the subject of Terms of Trade at the point of sale is the best time to do it. It goes back to that maxim that a sale until it is paid for. Everyone ‘high fives’ a new sale, but no one will applaud a bad debt. Avoiding it means you’re negotiating payment terms retrospectively, when money is already owed and the power has shifted accordingly. Reinforce your terms at every opportunity. For example, place them on order acknowledgements, account application forms, invoices, statements.

Open new accounts with discipline

The moment you open a new account is your best opportunity to establish good payment habits. Collect the full information, such as company registration number, payment address, the name of the person who authorises payment, and written acceptance of your terms. Run a credit check. Set a limit that reflects what you know about the customer’s position – not what you hope it might be.

Send the payment contact a letter confirming the credit limit and terms. It introduces you to the right person, sets expectations clearly, and creates a record you can refer to later.

Invoice quickly and accurately

A late or inaccurate invoice gives the customer a reason not to pay. Every day between completing work and raising an invoice is a day added to your collection cycle unnecessarily. Issue invoices the same day work is delivered or goods are dispatched. Check them before they go out. One error can trigger a dispute that delays payment by weeks.

Act quickly and confidently

Always analyse your aged debtor reports. Look for patterns of increasing debtor days. If you start experiencing problems in collecting your cash, be swift and confident in your actions:

• Know how each customer responds best to different chasing techniques. Email, phone, post, or simply going and see them in person. Visiting your major accounts to resolve problems and build relationships is a good way to keep the money flowing.
• Phone major accounts in advance of due dates to ensure payments are in process. The phone is still one of the most effective collection tools at your disposal.
• Send letters/emails to any overdue accounts too small to telephone. Doing this twice should be enough before you escalate the collection process.
• Final demands need to be final. Don’t allow anyone to ‘call your bluff’.
• Don’t hesitate to put a customer on ‘Stop’ if they do not respond to your requests.

How often have you heard that people do business on a handshake? It’s not a noble gesture to do this. In the worst case scenario, it can be catastrophic.

Terms of Trade exist to help you in the event of a problem. It ensures that both parties know what is expected of them to avoid disputes and to provide remedies should something derail.

Get Legal Advice

Making sure that your terms are watertight is vital. Don’t hesitate to get your lawyer on the case to give them a thorough vetting. Here are some standard areas to consider incorporating into your terms:

• Definitions (e.g. “buyer”, “seller”)
• Quality
• Price
• Quotations
• Delivery/date/arrangements
• Risk and property/retention of title
• Terms of payment
• Time limit for raising disputes
• Right to interest and compensation for debt recovery costs
• Loss or damage in transit
• Acceptance of goods
• Variations to contract
• Patent rights/indemnity
• Force majeure
• Jurisdiction/applicable law
• Assignment and subletting of contract
• Right to progress and inspect goods
• Warranties and liability
• Severability
• Insolvency and bankruptcy

Keep Repeating Yourself

Agreeing your terms at the outset of a trading relationship is only the beginning. The next step is to consistently reference them in your dealings with customers. Incorporate them into your credit application form. Draw them to the customer’s attention on every quote and proposal.

‘Battle of Forms’

When a customer tries to impose their own terms on to you it can get very confusing. Which set of terms prevails? English contract law has a principle called the ‘Battle of Forms’. This basically states that the party that presents their terms last in the transactional process prevails. So even though your terms may have been presented at the quote stage, add them to the order acknowledgement after you have received the customer’s purchase order.

Communicate Change

If you need to make a change to your terms be similarly robust in communicating that change to your customers. Make sure they formally acknowledge the change and keep reinforcing it by sending your terms through the transactional process as you have done.

Don’t Be Shy

No one likes conflict in business and there are many times when we may like to avoid it, or not do something for an easier life. Making sure your terms are watertight and in place is vital in ensuring that every sale is paid for, on time. Be firm and polite. It’s not rude. It’s just good business practice.

Ensuring that you can collect what you are owed is as much about the groundwork you put in beforehand as it is how you go about the actual processes of collection.

Get Organised

Make sure that you have a fast, accurate and systematic collection system that includes a variety of communications methods, such as invoices and statements, letters, emails, telephone and personal visits. Ensure you have mapped out an escalation process for your business that identifies when you will use each of these methods.

But before that point, get yourself in a good position so you mitigate the risks of doing business with any customer:

• Check a new customer’s creditworthiness before drawing up a contract.
• Refuse orders if a customer has an unacceptable payment record or obtain payment in advance.
• Set strict credit limits and keep to them.
• Prepare unambiguous written contracts and/or terms and conditions of trading.
• Involve the sales force in negotiating the payment terms and ensuring that these are understood and agreed from the outset.
• Make sure you know and comply with procedures used by your customers’ buying and accounts departments.
• Initiate and maintain close contact with your customers, particularly with the person responsible for paying your account.  Try to create a rapport so that, even when money is tight, you are top of the list to be paid.
• Make regular credit checks on your existing customers.
• Ensure that all despatch notes and invoices are accurate, and are delivered to the right customer, at the right address, at the right time.

Dealing with Disputes

At some point a customer will query an invoice. Make sure you have mapped out a system for handling this in advance of it happening. Because the quicker you can resolve it, the quicker you can obtain your cash. Your system should cover acknowledging the query swiftly, investigating it thoroughly and replying with as much evidence to support your reply as possible. If the query does not relate to the whole balance, make sure that the customer knows that the undisputed element of the debt is still payable within agreed terms. Make sure everything is done in writing so you have a documented trail.

When they simply won’t pay

If someone simply won’t pay and there is no reason for withholding payment, don’t hesitate to act. You could appoint a third party to pursue the debt for you. Or you could consider entering into legal proceedings. Always seek legal advice and look at the costs involved. There is frequently more than one avenue available to you and each has a cost attached. Explore the options and look at the cost and benefits of each.

But there are also remedies outside of the legal system. You may wish to impose collection sanctions such as stopping supply. You can also review their credit limit, impose interest and compensation for late payment, create a payment plan if you believe there is a genuine desire to pay, or seek to invoke a Retention of Title clause to get the goods back in your hands.

Keep Calm and Collect

It is a natural human response to get frustrated if someone refuses to pay you what you are owed. But it is vital to keep calm and negotiate rather than escalate your discussion into an argument.

The key is to ensure that your contact is proportionate, honest, calm and conducted with respect. Look to negotiate to achieve an agreement that ensures that they pay the invoice but perhaps offers some consideration for the circumstances they may have found themselves in that has prevented them for paying yet.

Liquidation

All is not lost if a company goes into receivership. Put the effort in to collect as much as you can. The receiver will usually contact creditors within 12 weeks of the date of the court order and advise whether a creditors meeting will be held. If you are not contacted, make sure you contact them and lodge your claim by requesting a Proof of Debt Form. You will be sent a report giving estimates of the insolvent’s assets and liabilities and what the causes of the failure are considered to be. If you think that a company is withholding information about the assets, you should write to the receiver with evidence.

When cash flows freely, businesses invest, hire, take on new contracts, and build. When it stalls, usually because money is sitting in unpaid invoices rather than in your bank, even a profitable business can find itself unable to move.

Cash flow finance exists to solve exactly that problem, and understanding how it works is the first step to making it work for you.

The terminology can feel like a barrier. It shouldn’t. Here’s a plain-English guide to some of the terms you’ll encounter.

The core concept

Invoice finance is a way of unlocking the value in your unpaid invoices before your customers pay them. Rather than waiting 30, 60, or 90 days, a finance provider advances a proportion of the invoice value – typically 70–90% – within 24 hours of the invoice being raised. You receive the remainder, minus fees, when the customer pays. The facility grows as your sales grow, which makes it one of the most naturally aligned funding tools available to an ambitious business.

Choosing the right structure

The right facility isn’t always the cheapest one on paper. It’s the one that fits your business, your customer relationships, and your growth ambitions. A funder who takes the time to understand all three is the right funder. One who leads with rate before understanding your business probably isn’t.

When cash flow works, everything else becomes easier. Businesses that get this right don’t just survive, they build the financial momentum that enables them to thrive.

The definitions in this article are taken from The Pocket Guide to Receivables Finance Terms from Receivables Finance Connect, which we helped to create.

Glossary of Cash flow Finance Terms

This glossary explains common terms used in Receivables Finance/Invoice Finance in plain English. It is designed to help UK business owners, directors, and managers understand the language used by finance providers, brokers, and advisers, and also supports learning for new professionals in the industry.

The document is designed to support informed decision-making by explaining technical terms clearly and consistently, reducing confusion and misunderstanding, and making it easier to compare different types of receivables-based funding with confidence.

The following glossary is educational in nature. It does not replace professional advice or individual contract terms, which may vary between finance providers.

A

ABL (See Asset-Based Lending)

Accounts Receivable (See Receivables) Money that your customers owe your business for goods or services you’ve already supplied to them on credit. Also called ‘Debtors’ or your ‘Sales Ledger’. These are valuable assets because they represent cash you’ll receive in the future, and finance providers may use them as security for a finance facility.

Administrative Receiver A licenced insolvency practitioner appointed by a finance provider to take control of a company’s assets and sell them to repay what’s owed. Unlike an Administrator, they act in the interests of the appointing finance provider, not creditors generally. This is becoming a rare type of appointment given changes to the insolvency regime.

Administrator An administrator is a licensed insolvency practitioner appointed to take control of a company that cannot pay its debts, with the aim of rescuing the business, achieving a better outcome for creditors, or selling its assets.

Advance Rate (See Prepayment Percentage) The percentage of an invoice’s total value that a finance provider will pay you immediately. For example, if you raise a £10,000 invoice and your advance rate is 85%, you’ll have access to £8,500, typically within 24 hours. The remaining £1,500 is paid when your customer (debtor) settles the invoice (minus fees).  You draw as much as you need, when you need it. (See Availability).

Aged Debt Report/Aged Sales Ledger A report showing how old each unpaid invoice is, usually grouped into categories like 0-30 days, 31-60 days, 61-90 days, and over 90 days old. This helps identify slow-paying customers (debtors) and potential problems.

Approved Debt Invoices that the finance provider has checked and agreed to fund. They’ve confirmed these invoices meet all the requirements and are willing to advance money against them.

Application for Payment A document used mainly in the construction sector to request payment for work completed at different stages of a project. Some finance companies fund these just like regular invoices, whether they’ve been officially certified by a surveyor or not.

Asset-Based Lender (See Finance Provider and Asset-Based Lending)

Asset-Based Lending (ABL) (Often discussed alongside receivables, but structurally distinct). A flexible finance facility secured against multiple valuable items your business owns – including assets such as Accounts Receivable (money owed by customers), stock, plant & machinery, or property. The higher the value of assets you have, the more your business can potentially borrow. If you can’t repay, the finance provider has title over the assets (See Title).

Asset Finance (Not to be confused with Asset-Based Lending above) Funding that helps you acquire equipment, vehicles, or machinery without paying the full cost upfront. This includes leasing (renting equipment), hire purchase (buying over time), or releasing cash from equipment you already own.

Assignment (See Equitable Assignment and Legal Assignment) The legal process where a business assigns its right to collect money from customers (debtors) to a finance provider. This means the finance provider can then legally claim payment directly from those customers (debtors).

Associated Business Any other business that you own, partly own, or control, or which is connected in a similar way to the business in which you work. Finance providers ask about these because they need to understand your complete business situation and any connected financial risks.

Auction Platform An online marketplace where you can put individual invoices or batches of invoices up for bid. Multiple investors compete to offer you the best terms, similar to eBay but for business invoices.

Audit A review of your accounting records carried out by your finance provider, or their agent, to understand any changes in trading practices that could affect your agreement. It also highlights anything that could lead to a breach in the future. In addition, it provides an opportunity to review whether the facility is delivering the service and funding you expect.

Availability The maximum amount of money you can draw from your finance facility right now. Calculated by taking your eligible invoices (and other business assets, in the case of asset-based lending), multiplying by your advance rate, then subtracting what you’ve already borrowed and any fees owed.

B

BACS (Bankers’ Automated Clearing System) A standard method for transferring money between UK bank accounts. Payments typically take three working days to arrive. Slower than CHAPS but usually free.

Bad Debt Money you’re unlikely to ever receive from a debtor, usually because they’ve become insolvent, disappeared, or it’s been unpaid for so long that recovery is impossible.

Bad Debt Protection (See Credit Insurance) A facility provided from the Finance Provider  that protects your business if debtors don’t pay due to insolvency or very long delays. If a protected debtor fails to pay, the finance provider covers the loss rather than taking the money back from you. This usually costs more but provides peace of mind.

Blanket Cover A standard minimum credit limit that a finance provider will automatically apply to all of your customers (debtors) without individual checks, unless they discover specific concerns about a particular customer’s (debtor’s) financial stability.

Blocked Account/Trust Account A bank account in your business name that your customers (debtors) pay into, which is controlled entirely by the finance provider which you can’t access.

Broker An adviser or intermediary who helps you find the right finance provider. They understand different finance providers’ criteria and aim to match your business needs with suitable finance providers, often at no cost to you.

C

Cash Allocations The process of matching money received from debtors to the specific invoices they’re paying. This ensures your records stay accurate and you know exactly which invoices are still outstanding.  With Invoice Discounting, you will continue to do this.

Cash Flow The movement of actual money in and out of your business over a period of time. Positive cash flow means more money coming in than going out – essential for paying bills and wages on time.

CHAPS (Clearing House Automated Payment System) A same-day payment service where money arrives in your bank account within hours rather than days. Useful for urgent payments but typically costs £15-£30 per transfer.

CHOC (Customer Handles Own Collections) With a CHOC facility, you retain responsibility for chasing your customers (debtors) and managing your own credit control, making it similar to invoice discounting. The key distinction is that your customers (debtors) pay the finance provider directly rather than paying you, meaning the arrangement is typically disclosed.

CIS (Construction Industry Scheme) A UK tax system where contractors must deduct tax from payments to subcontractors and pass it to HMRC. This affects cash flow, making invoice finance particularly useful in construction although the advance rates seen will be usually lower than other industry types.

Client The business receiving funding under an invoice finance facility from the finance provider. Note that your own clients/customers (the people who owe you money) are called ‘debtors’ or ‘customers’ to avoid confusion.

Collections Money received from your customers (debtors) in payment of their invoices, whether paid directly to the finance provider or the Trust Account, depending on your facility type.

Concentration Limit (See Debtor Concentrations) A safety measure limiting how much money a finance provider will lend against invoices from any single customer within your total facility. For example, your finance provider might only fund up to 40% from that one customer to spread their risk. This protects both you and them if that customer becomes insolvent.

Conditions Precedent Requirements or actions that must be completed before a finance facility becomes available or funds are advanced.

Conditions Subsequent Requirements or actions that must be completed after the facility has started or funds have been advanced, as an ongoing obligation.

Confidential Invoice Discounting (See Undisclosed Facility) A financing arrangement where you receive money against your Accounts Receivable but your relationship with the finance provider isn’t disclosed. You continue managing your own credit control and collections as normal. However, your customers (debtors) pay into a Trust Account – a bank account in your business name but controlled by the finance provider. They then allocate these payments against advances they have made and release the remaining balance to you.

Contra Reserve (See Set-Off) When two businesses both buy from and sell to each other. It can complicate invoice finance because one company might want to deduct what they owe from what they’re owed, reducing the actual amount available for financing. The finance provider will hold a reserve for the amount you owe to your debtor.

Correspondent Factor (See Factoring) A factoring company in another country that partners with your UK finance provider to handle overseas customers. They collect payment locally in the customer’s country and manage the foreign currency and legal aspects.

Covenant A rule written into your financing contract that you must follow (or things you must avoid doing). Breaking these rules can allow the finance provider to restrict your borrowing or even end the agreement. Examples include Debt Turn / DSO (see below) not exceeding any agreed number of days , , not taking on other loans without permission, or keeping your accounts up to date. Operational Covenants are ongoing conditions in a finance agreement that require a business to meet specific operational and reporting requirements (such as providing management accounts, maintaining insurance, or following agreed processes) for the facility to remain in place.

Credit Control All the activities involved in getting customers to pay on time – from checking they’re creditworthy before you give them credit, to sending reminders, making phone calls, and if necessary, taking legal action.

Credit Insurance A separate third party insurance policy that pays out if your customers (debtors) don’t pay due to insolvency or very long delays. You can buy this independently with the Finance Provider noted on the policy to receive any payments for funded debts..

Credit Limit The maximum amount the finance provider will lend against invoices from a specific customer. This is based on the customer’s (debtors) financial strength, creditworthiness and concentration (See Debtor Concentration and Concentration Limit) within your sales ledger. The credit limit should not be regarded as an opinion of credit standing but purely an amount the finance provider is prepared to advance in respect of sales to this customer (debtor).

Credit Note A document that reduces or cancels an invoice, typically issued for returned goods, overcharges, or to resolve disputes. These reduce the amount of money you’ll ultimately receive, which concerns finance providers who’ve already advanced against the original invoice (See Dilution).

Creditor A person or organisation that is owed money, typically after providing goods or services on credit and awaiting payment.

Credit Period/Terms How long you give customers to pay their invoices – for example, ‘30 days net’ means payment is due within 30 days of the invoice date.

Current Account Your running balance with the finance provider showing everything you owe them. It increases when they advance you money or charge fees, and decreases when your customers (debtors) pay. Think of it like a constantly updating statement.

Current Assets Items your business owns that will turn into cash within the next year, such as stock, money owed by customers, and cash in the bank. These are distinct from fixed assets like buildings or machinery that have long-term value.

Customer (See Debtor)

D

Debenture A legal document that gives the finance provider security over all of your company’s assets. This includes both specific items like property, invoices or equipment (called ‘fixed charges’) and changing assets like stock (called ‘floating charges’). If you fail to repay, the finance provider can claim these assets. Taking a debenture is standard practice in invoice finance and asset-based lending.

Debit Note A document issued by your customer which reduces the value of the sales ledger.  This is either agreed or not by the Client and if required a credit note processed to clear the debit note.

Debt In the context of Invoice Finance, money your customers (debtors) owe you in relation to invoices you’ve raised.

Debt Collection The process of actively pursuing overdue payments through reminder letters, phone calls, formal demands, and potentially legal action if customers refuse to pay.

Debt Factoring (See Factoring)

Debt Turn/DSO (Days Sales Outstanding) A measure of how quickly your customers (debtors) pay on average. If your DSO is 45 days, it means customers typically take 45 days to pay. Calculated by dividing your total outstanding invoices by your average daily sales.

Debt Verification Checks carried out by a finance provider to confirm invoices are genuine and will be payable, such as contacting customers to verify that goods or services have been delivered and accepted, helping to protect the finance provider against fraud.  This can be undertaken on a disclosed and confidential basis dependent on the facility provided.

Debtor A customer who owes you money for goods or services supplied on credit.

Debtor Concentration (See Concentration Limit) How much of your total sales ledger is made up by your biggest customers. If one customer represents 40% of your invoices, you have high concentration, which increases risk if that customer doesn’t pay.

Debtor Finance (See Receivables Finance)

Dilution Any reduction in invoice value. This includes customer returns, price adjustments, discounts given later, or disputes about quality. High dilution is concerning for finance providers because they’ve already advanced money based on the original invoice amount.

Disapproved Debt (See Ineligible Debt) Invoices that the finance provider won’t advance money against – usually because they’re too old (typically over 90 days), disputed by the customer, exceed credit limits, or involve problem customers.

Disbursement Charges for extra services the finance provider provides such as same-day payment fees (CHAPS charges), legal letters to non-paying customers, or other exceptional costs. These are added to the fees you’ll pay to the finance provider.

Discount Charge The amount you pay on money borrowed from the finance provider. Usually calculated daily on your outstanding balance and typically expressed as a percentage above the Bank of England base rate (e.g. ‘base rate plus 3%’). May use other bank indices if you have facilities in currencies other than GBP. Calculated in the same way as interest on an overdraft.

Direct Banking Where your customer (debtor) pays directly into your bank account rather than the Trust Account controlled by the finance provider. If this is not rectified in accordance with your finance agreement, it’s a serious breach and can result in immediate contract termination.

Disclosed Discounting An invoice finance arrangement where your customers (debtors) know a finance provider is involved, though you still handle your own credit control and collections. Less common than confidential discounting.

Discounter (See Finance Provider and Invoice Discounting)

Dispute When a customer refuses to pay an invoice – e.g. claiming goods weren’t delivered properly, were faulty, or that the amount is wrong. Disputed invoices are usually removed from funding until resolved.

Dunning Letters Formal reminder letters sent to customers to request or demand payment of overdue invoices. Often sent in a series of increasing urgency.

E

Early Payment (See Prepayment)

Eligible Invoices Invoices that meet all of your finance provider’s requirements and can be advanced against. To be eligible, an invoice typically must: be from an acceptable customer, be for genuine goods or services delivered in accordance with your usual type of business, not be too old (usually under 90 days), not be disputed, fall within credit limits, and comply with your agreement terms. Invoices that don’t meet these criteria are called ‘ineligible’ or ‘disapproved’ (See Non-Notifiable).

Entitlement The remaining balance that will become available once customers pay their invoices in full, calculated as total sales ledger value minus what the finance provider has already advanced. This is your money that’s still tied up in unpaid invoices.

Equitable Assignment (See Assignment and Legal Assignment) A transfer of ownership of a debt that’s legally valid even without written paperwork or notice to the customer, as long as both parties intended the transfer and value was given. Most invoice discounting arrangements work this way until the customer is formally notified.

Excluded Debt Specific invoices that are deliberately kept outside your financing arrangement – e.g. for customers you prefer to manage yourself or invoices that don’t meet the finance provider’s criteria. These are never submitted for funding.

Export Concentration Limit The maximum proportion of funding that can be supported against export invoices to a single country, customer, or region. This limit is set by the finance provider to manage risk, ensuring that exposure is not overly dependent on one overseas market or debtor.

Export Debt Amounts owed to your business by overseas customers for goods or services supplied, typically evidenced by invoices raised in a foreign currency or payable from outside the UK.

Export Factoring Invoice finance services specifically for selling to overseas customers, often including currency exchange, international credit checks, and protection against foreign customers not paying.

F

Facility Limit The maximum total amount you can borrow at any one time under your financing agreement. Unlike your Availability (which changes daily), this is a fixed ceiling that can only change by renegotiating with your finance provider.

Factor (See Finance Provider and Factoring)

Factoring A comprehensive service where the finance provider advances money against your invoices and takes over chasing your customers (debtors) for payment. Your debtors pay the finance provider directly and know the finance provider is involved. Often includes bad debt protection.

Factoring Fee (See Service Charge)

Finance Company (See Finance Provider)

Finance Provider In this context, the organisation that supplies your funding facility. Generic terms include lender, funder, or finance company. More specialist terms, depending on the structure, include factor (See Factoring), discounter (See Invoice Discounting), invoice finance company (See Invoice Finance), invoice discounter (See Invoice Discounting), or asset-based lender (See Asset-Based Lending).

Fixed Assets Long-term items your business owns and uses for operations rather than selling – such as buildings, vehicles, computers, and machinery. These differ from current assets which turn into cash within a year.

Fixed Charge (See Floating Charge) Security attached to a specific asset that stops the borrower selling or dealing with it without the finance provider’s consent. In an insolvency, fixed charge holders are paid out before floating charge holders and unsecured creditors.

Floating Charge (See Fixed Charge) Security over a general category of assets, such as stock, that doesn’t restrict how the business uses them day to day. Floating charge holders rank behind fixed charge holders when assets are distributed in an insolvency.

Foreign Exchange Currency exchange services that convert foreign payments into pounds (or vice versa) and can protect you against currency fluctuations when trading internationally.

Full Service Factoring A complete package where the finance provider handles everything relating to your accounts receivable – advancing money against invoices, managing your sales ledger, chasing payment from customers, and providing bad debt protection if customers don’t pay. You hand over all credit control responsibility.

Funder (See Finance Provider)

Funding Limit (See Credit Limit) The maximum amount the finance provider will provide against invoices from one specific customer, based on that customer’s financial strength and creditworthiness. Protects the finance provider from over-exposure to any single debtor.

Funding Period How long the finance provider will continue advancing money against an unpaid invoice. Typically 60-120 days from the end of the month in which the invoice is raised.  After this, they’ll ask you to repay the advance if the customer still hasn’t paid, or reduce the value of the availability.

Funds in Use The total amount of money you currently owe to the finance provider at this moment – everything they’ve advanced to you, plus fees and charges, minus customer payments they’ve received. This figure changes daily.

H

High Involvement (See Concentration Limit)

I

Import Factoring (See Factoring) When a UK-based finance provider (factor) helps overseas suppliers collect payment from UK customers. The opposite of export factoring – the finance provider is based in the buyer’s country rather than the seller’s.

Personal Guarantee A personal promise by a director or owner to cover any losses the finance provider suffers, regardless of whether the business itself is found to be liable.

Ineligible Debt (See Disapproved Debt)

Initial Payment (See Prepayment)

Inter-Factor Transfer (See Factoring) Moving your invoice finance facility from one provider to another. There’s a standard process for this to ensure your outstanding invoices and payments are transferred smoothly without disrupting your business.

Invoice A formal document you send to customers detailing what goods or services you’ve provided, how much they owe, and when payment is due.

Invoice Discounter (See Finance Provider and Invoice Discounting)

Invoice Discounting A finance facility where you receive money against your invoices (typically within 24 hours of raising them) but you keep control of chasing your customers (debtors) for payment. Can be confidential (customers unaware) or disclosed (customers informed).

Invoice Factoring (See Factoring)

Invoice Finance (See Receivables Finance) The umbrella term for all types of funding based on your unpaid customer invoices – including factoring, invoice discounting, and related services.

Invoice Finance Agreement Your contract with the Finance Provider setting out all terms, conditions, fees, advance rates, and responsibilities on both sides.

Invoice Finance Company (See Finance Provider and Invoice Finance)

Invoice Finance (See Receivables Finance)

J

JCT (Joint Contracts Tribunal) Standard contract templates widely used in the UK construction industry. Some Finance Providers are familiar with these and can advance money against payments due under JCT contracts.

L

Legal Assignment (See Assignment and Equitable Assignment) A transfer of the right to collect a debt that meets specific legal requirements: it must be in writing and the customer must be formally notified.

Lender (See Finance Provider)

Letter of Credit A guarantee from a bank (usually the buyer’s bank) promising to pay you once you prove you’ve shipped goods or completed work by providing specific documents. Commonly used in international trade to reduce payment risk.

Letter of Release (See Letter of Waiver)

Letter of Waiver A letter from your bank giving your Finance Provider priority over certain agreed assets (usually invoices) . Also called a letter of release. It’s standard practice at the start of a facility where a bank holds a debenture over your assets.

LIBOR (London Interbank Offered Rate) A benchmark interest rate that banks previously used when lending to each other, which finance providers used to calculate their charges. Now largely replaced by SONIA (Sterling Overnight Index Average).

Loan to Value (LTV) In asset-based lending (ABL), Loan-to-Value (LTV) is the percentage of an asset’s value that a finance provider is willing to advance as a loan.

M

Management Buy-In (MBI) When an external management team raises finance to buy and take control of a company. The new managers invest in the business they’re acquiring.

Management Buy-Out (MBO) When a company’s existing managers raise finance to buy the business from its current owners, often the founders or a parent company.

Minimum Fee A guaranteed minimum amount you’ll pay regardless of how much you invoice. For example, if the service fee is 1% of turnover but with a £1,000 monthly minimum, you’ll pay £1,000 even if your turnover only generates £800 in service fees that month.

N

Non-Notifiable Where invoices aren’t individually submitted to the finance provider for funding, even though they sit within the overall agreement.

Non-Recourse A financing arrangement where the finance provider takes on the risk if your customer (debtor) doesn’t pay due to insolvency. If a protected customer (debtor) becomes insolvent, owing you money, the finance provider absorbs the loss rather than taking back the money they’ve advanced to you. Provides peace of mind but typically costs more.

Non-Vesting Debts Invoices that you cannot legally sell to the finance provider (often because contracts forbid it) but which are held in a special arrangement to provide extra security. You keep legal ownership but promise to use any payments received to repay the finance provider.

Notifiable Invoice An invoice that you must assign to the finance provider under your agreement – essentially any invoice that falls within the scope of your facility.

Notice Period How much warning you or the finance provider must give before ending the contract – commonly 30, 60, or 90 days. You can’t just stop using the facility without giving proper notice.

Notification The process of formally telling the finance provider about a new invoice you’ve raised, providing all the details so they can assess it and potentially advance money against it.

O

On Account Cash Money received from a customer that you can’t immediately match to a specific invoice – e.g. they’ve paid a round sum that doesn’t match individual invoices, or didn’t provide a reference. May be held in a suspense account until it can be properly allocated.

Operational Covenant (See Covenant)

Overdraft A traditional bank facility that lets you go into negative balance on your current account up to an agreed limit. Unlike invoice finance, the limit is fixed, doesn’t grow with your sales and is commonly repayable upon demand.

Overpayment When the finance provider has advanced you more money than would be available under the terms of your agreement – e.g. because an invoice later became disputed or a customer became insolvent after funding, or for special circumstances that arise. You may need to repay this excess, or it might be allowed temporarily by agreement.

P

Personal Guarantee Where company directors or owners personally promise to repay the finance if the business cannot. This means your personal assets (home, savings) could be at risk if the business fails. Not all finance providers require these. They may also agree to limit the amount they may claim.

Performance Warranty A commitment by the owner, director or manager of a business to adhere to certain conditions of the facility agreement.  Typically this will relate to the point at which invoices are Notified to the finance provider or an undertaking to pass on monies received directly from the debtors.

Phoenix A new business that rises from the ashes of a previous failed company, often with similar operations, customers, or ownership. Finance providers are cautious about phoenixes due to the previous failure.

Prepayment/Prepayment Percentage (See Advance Rate) The money you receive immediately after raising an invoice, expressed as a percentage. For example, an 85% prepayment on a £10,000 invoice means you receive £8,500 straight away, with the remaining £1,500 (minus fees) paid when your customer (debtor) settles.

Proforma Invoice An invoice requiring payment before you deliver goods or services – essentially ‘payment upfront’. Common for new customers or risky transactions.

Prohibition (or Ban) Against Assignment A clause in a customer’s contract that stops you from assigning the benefit of the contract including invoices to a third party such as a finance provider. These clauses are common with government bodies and large retailers, so finance providers will usually ask the customer to sign a waiver before funding those invoices.

Proof of Delivery (POD)Evidence that goods or services have been received by the customer, typically confirming what was delivered, when, and to whom.

Purchase Ledger/Creditors Ledger Your record of all money you owe to suppliers. Shows all unpaid supplier invoices.

Purchase Order Finance Funding that enables you to pay suppliers for goods you need to buy, before you’ve sold them on to your customer (debtor). Bridges the gap between buying and selling.

R

Reassignment When ownership of an invoice transfers back from the finance provider to you – typically because it’s become uncollectible or the customer has gone into administration.

Receivables (See Accounts Receivable) Money owed to your business by customers – simply another term for ‘accounts receivable’ or ‘debtors’. When you’ve supplied goods or services on credit but haven’t been paid yet, that unpaid amount is a receivable. Your total receivables make up your sales ledger.

Receivables Finance (See Invoice Finance) Another term for invoice finance – the practice of raising working capital by borrowing against money your customers (debtors) owe you. Called ‘Receivables Finance’ because it’s based on your Accounts Receivables (unpaid invoices). Also known as ‘Sales Finance’, ‘Invoice Finance’, or ‘Debtor Finance’.

Reconciliation The process of checking that your Sales Ledger records match the finance provider’s records perfectly, ensuring there are no discrepancies in invoices, payments, or credits. Usually done monthly and usually only applies to invoice discounting facilities.

Recourse The concept that you remain responsible if your customers (debtors) don’t pay. If an invoice stays unpaid beyond the funding period, the finance provider will withdraw their advance and you must repay them, whether or not your customer (debtor) eventually pays.

Recourse Period How long the finance provider provides funding against an unpaid invoice before asking you to repay it. Typically 90-120 days from invoice date.

Refactoring Charge An extra fee charged on invoices that remain unpaid beyond the normal recourse period. Covers the finance provider’s additional administration costs for very old debts.

Reserve Money held back from what’s available to you, set aside to cover potential issues like anticipated credit notes, likely disputes, or seasonal variations in your business.

Retention Money held back from payments by your customer (debtor), and only released when work is completed satisfactorily or defects are fixed some time in the future. Common in construction sector contracts.

Retention of Title (ROT) A clause in supplier contracts stating that goods remain the supplier’s property until fully paid for. This can affect asset based finance because if your customer (debtor) hasn’t legally ‘bought’ the goods yet, the invoice might not qualify for funding, or a reserve may be applied to availability in a stock finance facility.

Reverse Factoring (See Supply Chain Finance)

S

Sales Finance (See Invoice Finance)

Sales Ledger Your complete record of all customer invoices – showing who owes you money, how much, and when it’s due. This is the basis for invoice finance.

Schedules The detailed list you submit with your invoices showing customer names, invoice numbers, dates, amounts, and payment terms. Used by the finance provider to track what they’re financing.

Selective Invoice Finance A flexible arrangement where you choose which invoices or customers to finance rather than having to submit everything. Useful if you only need funding for certain contracts or clients.

Self-Billing An arrangement where your customer (debtor) notifies you, or creates the invoice for the amount they owe you, rather than you sending one to them. Common with large retailers and public sector bodies. These invoices can still be financed.

Service Charge/Fee The main fee for using the invoice finance facility, typically charged as a percentage of your total invoiced amount (e.g. 0.5-3% of turnover) or sometimes as a fixed monthly amount.

Set-Off/Contra When a customer reduces or cancels what they owe on an invoice by deducting a claim against you – for example, because goods were faulty or not delivered. They may also be able to deduct a separate debt you owe them, as long as it existed before they were told about the assignment.

SME (Small and Medium-sized Enterprises) Smaller businesses, typically defined in the UK as those with fewer than 250 employees and turnover under £50 million. Most invoice finance customers are SMEs.

Spot Factoring Financing individual invoices one at a time as you choose, without any ongoing contract or commitment. Useful for occasional cash flow needs rather than continuous funding.

Spread (See Concentration Limit) In receivables finance, ‘spread’ refers to the diversity of a business’s customer (debtor) base.

Stage Payments/Staged Payments/Interim Payments Splitting a large project into multiple invoices raised at agreed milestones (e.g. 25% on design, 50% on delivery, and 25% on completion). Not all stages may be eligible for funding, depending on the finance provider and structure, and this is typically offered by finance providers specialising in staged or contract-based finance.

Statement of Account A summary you send to customers showing all invoices, payments, and credit notes on their account – basically their running balance with you.

Supply Chain Finance A financing programme based on a large buyer’s strong credit rating that helps their smaller suppliers get paid quickly. The buyer approves invoices, which suppliers can then get funded immediately at good rates because the buyer (not the supplier) is guaranteeing payment.

Survey An initial assessment the finance provider carries out before offering you a facility, checking your accounting systems, procedures, customer quality, and general business operations to assess suitability and risk.

T

Take-On Debts All the outstanding invoices you already have when starting a new invoice finance facility. These existing unpaid invoices become part of the facility and can be funded immediately.

Termination Event Specific serious situations written into your contract that allow either you or the finance provider to end the agreement immediately – such as insolvency, breaking key rules (covenants), or fraud.

Termination Fee A charge for ending your facility before the minimum contract period is up – typically calculated to compensate the finance provider for lost revenue.

Title Legal ownership of the assets used as security for the loan.

Trade Finance Specialist financing for international trade, helping with the complexities of importing and exporting – including letters of credit, currency management, and payment guarantees across borders.

Trust Account A bank account in your business name that you can’t directly access – controlled by the finance provider. With invoice discounting, your customers (debtors) pay into this account, and the finance provider then allocates the money correctly before releasing your balance.

Two-Factor System (See Factoring) An international arrangement using two cooperating finance companies: one in the seller’s country (export factor) and one in the buyer’s country (import factor). The import factor collects payment locally from the overseas customer and passes it to the export factor, who pays the seller. This reduces currency and collection risks.

U

Undisclosed Facility (See Confidential Invoice Discounting)

V

Validation Order If a creditor issues a winding up petition, a validation order is usually required for your finance provider to continue making advances. Your solicitor will need to apply to the court to confirm that the agreement can continue. Your existing invoicing and collections are not affected.

Vendor Another word for supplier – the businesses you buy from.

Verification Random checks where the finance provider contacts your customers (debtors) directly to confirm invoices are genuine, goods were delivered as described, and there are no disputes. This protects against fraud and ensures quality control.

Vesting (Whole Turnover) An arrangement where every invoice you raise automatically belongs to the finance provider the moment it’s created, without you needing to submit it separately. This is different from an offer and acceptance facility, where invoices must be actively submitted.

W

Waiver (See Letter of Waiver)

Whole Turnover The finance provider will typically require that substantially all invoices are notified to them. (See Selective Invoice Finance).

Working Capital The money available for running your business day-to-day, calculated as current assets (cash, stock, money owed to you) minus current liabilities (bills to pay). Positive working capital means you can pay your bills; negative means cash flow problems.