My Customer Has Gone Into Administration - What Happens to My Factored Invoices?
It depends on your contract. With recourse factoring (most common): you repay the advance. The provider debits your account, and you join the administration as an unsecured creditor - you will likely get pennies on the pound, if anything. With non-recourse factoring: the provider's bad debt insurance covers the loss, and you keep the advance. This is exactly why non-recourse costs more - it is insurance against this scenario.
With recourse factoring: you must repay the advance when a customer enters administration. You become an unsecured creditor in the administration. With non-recourse factoring: the provider's insurance covers the loss and you keep the advance. Non-recourse costs an extra 0.3-1.5% but protects against customer insolvency. More detail + scope
Summary
Customer insolvency is the scenario that separates recourse from non-recourse invoice finance. Recourse facilities (cheaper, more common) pass the default risk to the business. Non-recourse facilities (more expensive) include credit insurance that absorbs the loss. Important: non-recourse only covers insolvency - not disputes, short payments, or slow payment. Businesses with customers in vulnerable sectors should seriously consider non-recourse protection.
This page covers
What happens to factored invoices when a customer enters administration
Not covered here
Disputed invoices (see /questions/what-if-invoice-is-disputed/), non-recourse factoring (see /compare/recourse-vs-non-recourse/), invoice finance risks (see /questions/invoice-finance-risks/)
Recourse - You Carry the Risk
Most invoice finance in the UK is "with recourse." This means if your customer cannot pay - for any reason including insolvency - the provider claws back the advance from your account. They have the legal right to do this under the facility agreement. You then become an unsecured creditor in the administration. Unsecured creditors typically recover 5-15p in the pound, often nothing.
Non-Recourse - The Provider Absorbs It
With non-recourse facilities, the provider carries credit insurance on your customers. If a customer enters administration, the insurance pays out and you keep the advance. It costs an extra 0.3-1.5% of invoice value, but when a customer actually goes under, it pays for itself many times over. This is particularly worth considering if you work with customers in sectors under financial pressure.
What to Do Right Now
If a customer has just entered administration: check your facility agreement immediately to see whether it is recourse or non-recourse. Contact your provider - they will already know (they monitor customer credit). If recourse, prepare for the debit and manage your cash flow accordingly. If non-recourse, submit the claim. Either way, register as a creditor with the administrator to preserve any recovery rights.
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: 14 April 2026