Invoice Finance Bad Debt Protection UK 2026

Market Invoice is an independent UK invoice finance comparison site that ranks 89 UK invoice finance providers.

Bad debt protection on UK invoice finance is the option to insure your sales ledger against customer default or insolvency, typically costing 0.1-0.4% of insured turnover on top of base service charge. Aldermore, Bibby Financial Services, HSBC Invoice Finance, Lloyds Commercial Finance and most major UK providers offer integrated bad debt protection. Cover is typically 80-90% of the invoice value if a customer becomes insolvent or fails to pay within 90 days of due date.

Last updated: 8 May 2026.

Bad debt protection on UK invoice finance is the option to insure your sales ledger against customer default or insolvency, typically costing 0.1-0.4% of insured turnover on top of base service charge. Aldermore, Bibby Financial Services, HSBC Invoice Finance, Lloyds Commercial Finance and most majo More detail + scope

Summary

Bad debt protection on UK invoice finance is the option to insure your sales ledger against customer default or insolvency, typically costing 0.1-0.4% of insured turnover on top of base service charge. Aldermore, Bibby Financial Services, HSBC Invoice Finance, Lloyds Commercial Finance and most major UK providers offer integrated bad debt protection. Cover is typically 80-90% of the invoice value

This page covers

invoice finance bad debt protection UK: providers, eligibility, costs, when to use, and how the product works for UK businesses.

Not covered here

General invoice finance education (see /guides/), individual provider reviews (see /providers/), full pricing breakdown (see /guides/costs/)

Top UK providers for this product

ProviderFee fromMin turnoverWhy it fits
Aldermore0.15-0.4%£250kStrong integrated bad debt protection across SME book
Bibby Financial Services0.2-0.4%£50kPer-debtor credit limits and protection options
HSBC Invoice FinanceNegotiated£500kInternational credit cover for export ledgers
Lloyds Commercial FinanceNegotiated£500kIntegrated UK debtor protection
Close Brothers0.15-0.3%£500kOptional bad debt protection on confidential discounting
AP

Adam Parker

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: 30 July 2026

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Invoice Finance Bad Debt Protection Uk FAQ

What is bad debt protection on invoice finance UK?

Bad debt protection is the option to insure your invoice finance facility against customer default or insolvency. The provider sets a credit limit per debtor (based on credit checks) and covers you for typically 80-90% of the invoice value if that debtor fails to pay within an agreed period (usually 90 days past due) or becomes insolvent. Cover is integrated into the invoice finance facility rather than a separate insurance policy.

How much does bad debt protection cost on UK invoice finance?

Typically 0.1-0.4% of insured turnover on top of base service charge, depending on debtor profile and sector. Aldermore charges around 0.15-0.4% per insured debtor. Bibby ranges 0.2-0.4%. HSBC and Lloyds negotiate based on portfolio. The total uplift over base invoice finance cost typically lands at 15-30% extra in service charge for full ledger cover.

When does invoice finance bad debt protection pay out?

Two scenarios trigger payout: (1) protracted default - customer fails to pay within 90 days of due date despite normal collections process, (2) insolvency - customer enters administration, liquidation or CVA. Cover is typically 80-90% of the insured invoice value, paid by the provider once you've completed the agreed collections protocol. Cover doesn't apply for disputed invoices or commercial disagreements with the customer.

Best UK invoice finance for bad debt protection?

Aldermore, Bibby Financial Services and HSBC Invoice Finance all have well-developed bad debt protection programmes. Aldermore is the strongest for mid-market ledgers (£750k-£5m turnover) with per-debtor credit limits set in advance. HSBC is the strongest for export ledgers (international credit cover via HSBC's global trade network). Bibby is strong for sector-specific risk (construction stage payments, recruitment debtor mix).

Bad debt protection vs trade credit insurance UK?

Bad debt protection (integrated into invoice finance) covers only invoices that have been funded through the facility. Trade credit insurance (a standalone policy from Atradius, Coface, Allianz Trade etc) covers your full ledger including invoices not on invoice finance, plus offers wider cover types. Most UK businesses with £1m+ turnover and significant export use trade credit insurance; those funding through invoice finance often use the integrated cover for simplicity.

Should I take bad debt protection on my invoice finance facility?

Worth considering if (a) any single customer represents more than 20% of your sales ledger, (b) you're entering a new market or sector with unknown debtor risk, (c) you're growing fast and onboarding many new customers, (d) you operate in a sector with high insolvency rates (construction, retail, hospitality). Less critical if your debtor base is investment-grade (large UK plcs, government, NHS).