The history of invoice finance in the UK.
The history of Invoice finance is long and storied. The entire industry has undergone a remarkable transformation in the UK since its introduction in the 1960s. Emerging as a niche financial tool in the 1960s, it faced widespread scepticism and mistrust. Fast-forward to 2025, and it has become a go-to funding solution for small and medium-sized enterprises (SMEs). This blog explores its journey, highlighting key milestones, evolving perceptions, and the significant role it now plays in business growth and stability.
The 1960s: The Birth of Invoice Finance in the UK
Invoice finance first appeared in the UK during the 1960s as businesses sought alternative funding solutions. Originally modelled after the factoring services seen in the US, the concept was simple: companies could sell their unpaid invoices to third parties, known as factoring companies, in exchange for immediate cash flow.
However, the market was far from trusting. Many viewed factoring and invoice discounting as desperate measures, suitable only for businesses in financial distress. The lack of transparency in disclosed invoice discounting further added to the stigma, keeping mainstream adoption at bay.
The 1980s-1990s: Gradual Adoption Amid Economic Change
The economic turbulence of the 1980s and 1990s prompted businesses to reconsider their funding strategies. Traditional bank loans were harder to secure, driving SMEs to explore alternative funding solutions, including invoice finance.
During this period, the industry evolved:
Improved Services: Factoring services became more structured, offering credit control services and debt chasing, which helped SMEs manage receivables effectively.
Increased Awareness: Education around working capital finance and accounts receivable financing began to reduce the stigma.
Technological Advances: Early digitisation streamlined operations, making invoice factoring and debt factoring more accessible.
While not yet mainstream, invoice finance gained traction as a reliable business funding option.
The 2000s: A Turning Point for Invoice Finance
The 2000s marked a turning point for invoice finance in the UK. With the rise of asset-based lending and outsourced credit control, SMEs increasingly recognised its value in boosting cash flow and facilitating growth.
Key Developments:
Regulation and Transparency: Industry regulations ensured greater transparency, reducing concerns around disclosed invoice financing.
Diverse Offerings: Businesses could choose between recourse factoring, non-recourse factoring, and invoice discounting, tailoring solutions to their needs.
Specialised Providers: Invoice factoring companies offered bespoke solutions, making it easier for businesses to leverage funding.
The 2020s: Essential Funding Solution for SMEs
Today, invoice finance is no longer viewed as a last resort. Instead, it’s a vital part of the financial toolkit for SMEs. The industry has grown significantly, with innovative offerings such as receivables factoring and debt factoring becoming commonplace.
Why It’s Thriving:
Flexibility: Unlike traditional loans, invoice finance adapts to a business’s growth, making it ideal for scaling companies.
Enhanced Cash Flow: By unlocking cash tied up in invoices, SMEs can invest in business growth without increasing debt.
Alternative Funding: As banks tighten lending criteria, invoice finance provides an accessible and reliable solution for businesses seeking working capital finance.
Why Choose Partnership Invoice Finance?
At Partnership Invoice Finance, we specialise in tailored cash flow solutions for SMEs. Our services include:
Disclosed invoice discounting or factoring.
Outsourced credit control and debt chasing.
With decades of experience, we’ve supported countless businesses across London and the South East in achieving their growth ambitions.
Conclusion
From its sceptical beginnings in the 1960s to its indispensable role today, invoice finance has evolved into a cornerstone of SME funding. By offering flexibility, reliability, and tailored solutions, it’s helping businesses across the UK thrive in a competitive market.
Contact Partnership Invoice Finance today to explore how we can support your business with customised funding solutions.
About the Author
Chris Falby
With over two decades dedicated to helping businesses in the South East thrive, Chris, Sales and Marketing Director, brings a wealth of knowledge in securing financial assistance for SMEs. His career began in mainstream banking, where he gained valuable experience managing advances. This foundation, coupled with his extensive network and expertise in independent funding, allows Chris to provide tailored invoice finance solutions that meet the unique needs of each client.
