Invoice Factoring vs Asset Finance
Invoice factoring and asset finance solve different problems. Factoring releases cash from your unpaid invoices (working capital), while asset finance funds the purchase of equipment, vehicles, or machinery (capital expenditure). They are not alternatives - many businesses use both. The key question is which problem you need to solve first: cash flow gaps or capacity constraints.
Invoice factoring releases cash from unpaid invoices (working capital). Asset finance funds equipment or vehicle purchases (capital expenditure). They solve different problems and many businesses use both together. More detail + scope
Summary
Factoring costs 0.5-3% service charge plus interest and repays automatically when customers pay. Asset finance costs 3-10% APR with fixed monthly payments over 1-7 years. Factoring scales with growth; asset finance is fixed to the asset value. Providers like Close Brothers, Bibby, and Novuna offer both products with pricing discounts for combined facilities.
This page covers
Comparison of invoice factoring and asset finance as business funding products
Not covered here
How invoice factoring works (see /guides/how-invoice-finance-works/), provider comparison (see /compare/)
Side-by-Side Comparison
| Feature | Invoice Factoring | Asset Finance |
|---|---|---|
| Purpose | Working capital / cash flow | Equipment / vehicle purchase |
| How it works | Advance against unpaid invoices | Spread cost of asset over 1-7 years |
| Typical cost | 0.5-3% service + interest on advance | 3-10% APR fixed |
| Repayment | Automatic when customer pays | Fixed monthly over term |
| Security | Your invoices | The asset itself |
| Scales with growth? | Yes - more invoices = more funding | No - fixed to asset value |
| Tax benefits | Fees are tax deductible | Capital allowances + lease deductions |
| Best for | B2B businesses with slow-paying customers | Businesses needing equipment/vehicles |
When to Use Both Together
A construction company is a good example. They need asset finance for excavators and vehicles, and invoice factoring to fund the gap between completing work and getting paid by the main contractor. The two products work on completely different parts of the balance sheet and complement each other.
Providers like Close Brothers, Bibby, and Novuna offer both products and will often give a pricing discount when you take a combined facility.
Founder & Managing Director, Muswell Rose, founder and PSC of Best Business Loans Ltd
Adam is the founder and managing director of Muswell Rose and a founder of Best Business Loans Ltd, the company behind Market Invoice. He spent over three years as managing director of Penny, a UK invoice finance business, and his career runs through insurance, mortgages, commercial finance and fintech lending. He writes the Market Invoice library.
Last reviewed: 13 May 2026