You took out invoice finance to solve a cash flow problem. Now the invoice finance itself feels like the problem.
Maybe it’s the cost – the fees seemed reasonable at the time, but your turnover’s doubled and the service charge hasn’t moved. Maybe it’s the credit control – they’re either too aggressive (damaging customer relationships) or too soft (not collecting effectively). Maybe it’s the funding restrictions – concentration limits, credit caps, or a facility ceiling you hit six months ago that they won’t increase.
Or maybe you’ve simply outgrown them.
Whatever the reason, most businesses assume switching invoice finance providers will be complicated, time-consuming, and risky – that there’ll be a gap in funding, customer confusion, or unexpected costs.
Twenty years arranging invoice finance, including significant time at RBS and Aldermore on the lending side, I can tell you this: switching providers is now significantly simpler than most businesses think.
Here’s how it actually works.
When You Should Review Your Invoice Finance
Most businesses don’t review their invoice finance until something breaks – a dispute with collections, a declined increase request, a shock fee. By that point, you’re reviewing under pressure, which limits your options.
Better to review at these trigger points:
Your turnover changes significantly. Service fees typically decrease as turnover increases. If you’re now turning over £5m but paying the same rate you paid at £2m, you’re overpaying. Equally, if turnover’s dropped and you’re hitting minimum monthly fees, your facility may no longer fit.
You’ve been trading 2+ years. When you first arranged invoice finance, you might not have met certain lenders’ criteria – minimum trading history, minimum turnover, sector requirements. As your business matures, you unlock access to lenders who either offer better terms or suit your structure better.
You’re hitting funding restrictions. If you’ve reached your facility limit, or you’re constantly capped on specific customers due to concentration restrictions or credit limits, you’re strangling growth to fit your funding.
You’re paying for services you don’t need. Full factoring with outsourced collections made sense when you had two staff. Now you’ve got an in-house credit controller, you might be better with confidential invoice discounting at a fraction of the cost.
Your relationship’s broken. Sometimes it’s not the product or the price – you’ve just fallen out with the provider, or they’ve changed account managers three times in a year, or they’ve been acquired and service has deteriorated.
Any of these scenarios warrants a review – not necessarily a switch, but at least a market check to confirm you’re getting appropriate value.
What Stops Businesses Switching
The three things businesses worry about when considering switching:
One: It’ll be complicated and time-consuming.
Years ago, this was true. Different systems, manual processes, administrative burden fell on the business.
Now? UK Finance (the trade body most invoice finance providers belong to) has standard transfer procedures members must follow. The incoming and outgoing lenders handle the transfer between themselves. Your involvement is minimal.
Two: There’ll be a funding gap.
There won’t. The incoming lender completes a funding calculation on transfer day, works out how much they can advance against your current debtor book, and uses that to repay the outgoing lender. Any surplus goes into your new facility immediately available.
In some cases – if the new lender has better advance rates or a higher facility limit – you actually receive an immediate cash injection the day you switch.
Three: It’ll cost a fortune in termination fees.
Most invoice finance agreements require 30-60 days’ notice to terminate. If you’re outside your minimum term and serve proper notice, there’s typically no penalty.
Even if there is a termination fee, several lenders will cover this partially or fully as part of bringing your business across. And in many cases, the cost savings from switching more than offset any exit fee over the following 12 months.
These three fears keep businesses locked into unsuitable facilities – often paying significantly more than they should – for years.
How the Transfer Process Actually Works
Here’s what happens when you switch invoice finance providers:
Step One: Serve notice on your current provider.
You need to give written notice stating your intention to terminate. Check your agreement for the notice period – usually 30-60 days.
(Worth noting: before you serve notice, speak to them. Sometimes they’ll improve terms rather than lose you. If they do and it’s genuinely competitive, staying might make sense. If they don’t, at least you tried.)
Step Two: Application to the new lender.
Standard due diligence – they’ll review your business, debtor book, credit position. Same process as any new facility. Takes 5-10 days typically, assuming clean financials and no complicating factors.
Step Three: Offer and acceptance.
New lender issues an offer. You review terms, accept if suitable, provide any additional documentation they need.
Step Four: Lender-to-lender transfer.
This is where it gets simple for you. The two lenders agree a transfer date. On that date: the new lender completes a calculation of how much they can advance against your debtor book, uses that advance to settle the outstanding balance with the old lender, any remaining funds transfer into your new facility immediately, you start operating under the new facility from that day.
Total elapsed time from application to transfer: typically 2-3 weeks, depending on due diligence.
Your involvement during the actual transfer? Minimal. The lenders manage it between themselves.
What About Your Customers?
This depends on which type of facility you’re switching between:
If you’re moving from factoring (disclosed) to factoring: Your customers already know you use invoice finance. They’ll receive notification that payments should now be made to the new provider. Standard process, no confusion.
If you’re moving from factoring to confidential invoice discounting: You’re moving from disclosed to confidential funding. Your customers stop being contacted by the finance company – collections come back in-house. From their perspective, things actually simplify. You just revert to collecting your own invoices.
If you’re moving between two confidential facilities: Your customers never knew you used invoice finance and still won’t. Nothing changes from their perspective.
The scenario businesses worry about – customers confused about where to pay, or concerned about your financial stability – rarely happens in practice. This is a routine part of business financing. Most customers, if they even notice, don’t care.
When Your Current Provider Resists
Occasionally, outgoing providers make things difficult. They’re losing a client – sometimes they’re not gracious about it.
They might: delay providing required information to the new lender, dispute the exit balance calculation, impose unexpected fees, suddenly identify “issues” they never mentioned before.
This is where having an experienced broker matters. We’ve managed hundreds of these transfers. We know what’s legitimate process and what’s obstruction. And we know how to escalate when providers are being deliberately obstructive.
Most lenders behave professionally – it’s in their interest to maintain industry relationships. But when one doesn’t, you need someone who knows how to handle it.
What We Actually Do to Help You Switch
Our role in switching providers is straightforward:
First, we assess whether switching makes sense. Not everyone needs to switch. Sometimes the issue is operational and fixable with your current provider. Sometimes the market’s not significantly better and the disruption isn’t worth it. We’ll tell you honestly if we think you should stay put.
Second, if switching makes sense, we identify which providers suit your business. Not just “who’ll take you”, but who’s the right fit. That means understanding: your sector and whether they have appetite for it, your turnover and growth trajectory, your debtor concentration, your preferred facility type (factoring vs discounting), whether you need additional services (bad debt protection, export finance), whether you have any complexity (overseas ownership, group structures, recent financial difficulties).
Third, we prepare your application properly. Lenders see dozens of applications weekly. The businesses that get approved quickly provide complete information upfront. We make sure yours does.
Fourth, we negotiate terms. Advance rates, service fees, facility limits, credit control approach – all negotiable if you know what levers exist and what’s reasonable to ask for. After 20 years, we do.
Fifth, we manage the transfer process. Liaison between you, old lender, new lender, solicitors. Making sure deadlines are met, information flows properly, and nothing falls through gaps. You focus on running your business; we handle the administrative burden.
The cost to you? Nothing directly. Like all invoice finance brokers, we’re remunerated by the lender on successful completion. Which we’re completely transparent about. Our incentive is getting you into the right facility, because we’re building long-term relationships, not doing one-off deals.
The Real Question: Should You Switch or Should You Stay?
Sometimes switching is obvious – you’re paying 50% more than market rate, they’ve declined a reasonable increase request, or the relationship’s simply broken.
Sometimes it’s marginal – you’d save £8,000 annually but the disruption isn’t worth it. Or you’re frustrated with credit control but their rates are genuinely competitive.
And sometimes you shouldn’t switch at all – maybe you’ve had a specific dispute but overall they’re good, maybe the market’s not better enough to justify moving, maybe you’re mid-acquisition and now’s the wrong time for operational change.
We can usually tell you within a 20-minute conversation which scenario you’re in. And if the answer’s “stay with your current provider but renegotiate”, we’ll tell you that.
What Happens Next
If you’re using invoice finance and wondering whether you should review your arrangement, call us. We’ll assess your current facility, check it against market rates, and tell you honestly whether you’d benefit from switching.
No obligation. No pressure. Just a straight answer based on 20 years’ experience on both sides of invoice finance.
Call 0113 5182253 or email hello@shadowfaxufunding.com
If you want to know more about invoice finance – see our Invoice Finance page here