Do All My Invoices Have to Go Through the Factoring Company?
With whole-turnover factoring, yes, all B2B invoices go through the facility. With selective/spot factoring, no, you choose which invoices to finance. Whole-turnover gets better rates. Selective gives more control.
Why This Matters
This is the single biggest decision point when choosing invoice finance. Whole-turnover facilities (where every B2B invoice goes through the ledger) typically offer 0.5-1.5% discount fees versus 2-4% for selective invoice finance. However, locking all your invoices into one facility means your factoring company becomes part of your customer payment infrastructure.
If you invoice blue-chip corporates on 30-day terms alongside slower-paying SMEs on 60-90 days, whole-turnover means even your best payers go through the same collections process. Selective factoring lets you pick the £50,000 construction invoice you need funded today while keeping your regular £5,000 monthly retainers outside the facility.
The trade-off is cost versus flexibility, and it affects everything from how you onboard customers to whether you can switch providers mid-year without disrupting cashflow.
Key Points
- Whole-turnover invoice finance requires 80-100% of eligible B2B invoices to go through the facility, typically offering discount fees of 0.5-1.5% and advance rates of 85-90%
- Selective (spot) invoice factoring lets you choose individual invoices to fund, with discount fees typically 2-4% but no minimum volume commitments
- Minimum contract terms differ: whole-turnover usually requires 12-24 month commitments with 3-6 month notice periods, selective is often pay-as-you-go
- Customer notification differs by structure: confidential invoice discounting (whole-turnover) keeps funding invisible, factoring (whole or selective) notifies debtors to pay the finance company directly
- Exit mechanics matter: leaving a whole-turnover facility mid-contract often triggers 3-6 months of ongoing fees even after notice is served, while selective has no such lock-in
- Sector pricing varies significantly: construction firms typically pay 1.2-2% on whole-turnover due to retention risk, while recruitment agencies with PSL clients often secure 0.6-1% rates
- Credit control inclusion: whole-turnover factoring typically includes full collections service, selective factoring usually means you chase payment yourself and repay advances if invoices remain unpaid beyond 90 days
Real-World Example
A Leeds-based IT support company with £800,000 annual turnover invoices a mix of clients: three large corporates (£400k combined, 30-day terms) and fifteen SMEs (£400k combined, 45-60 day terms). Their bank offered whole-turnover factoring at 1.2% discount fee, 85% advance rate. A selective provider quoted 3.5% per invoice with 80% advances.
They chose whole-turnover initially to access cheaper funding across their entire ledger. After 18 months, two of their corporate clients complained about the third-party collections calls for invoices they always paid on time. The company investigated switching to confidential invoice discounting (still whole-turnover but without debtor notification), which their existing provider offered at 1.4%.
The 0.2% increase cost them roughly £1,600 annually but eliminated the customer friction that had risked two major contracts.
Common Pitfalls
- Assuming selective factoring is cheaper because 'you only pay when you use it': the per-invoice rate is typically 2-3x higher, so frequent users end up paying significantly more than whole-turnover arrangements
- Not reading concentration limits in whole-turnover agreements: most facilities won't advance against invoices if one debtor exceeds 25-30% of your ledger, creating sudden funding gaps when you win a large contract
- Failing to check debtor notification requirements before signing: switching from confidential discounting to notified factoring mid-contract can confuse major customers and damage trading relationships
- Overlooking minimum monthly fees in whole-turnover contracts: many facilities charge £500-£1,500 monthly minimums regardless of usage, making them expensive for businesses with seasonal or project-based revenue
- Not confirming which invoices are 'eligible': whole-turnover doesn't mean every invoice qualifies, consumer invoices, retentions beyond 10%, overseas debtors, and invoices to associated companies are typically excluded
What to Do Next
- List your top ten customers by revenue and their typical payment terms, then calculate what percentage of your annual turnover they represent to identify concentration risk before applying
- Request sample whole-turnover and selective factoring quotes from at least three providers on the allowlist (such as Close Brothers, Bibby Financial Services, and Novuna Business Finance) with your actual debtor ledger for realistic pricing
- Ask existing customers (particularly larger corporate clients) whether they have experience paying invoice finance providers directly and whether this would cause procurement or payment system issues
- Review your current sales pipeline for the next 12 months to check whether upcoming large contracts would breach typical debtor concentration limits of 25-30% in whole-turnover facilities
- If seasonal cashflow is a factor, model both options across your quietest and busiest quarters to compare actual costs including minimum monthly fees and notice period exposure
Related Questions
Can I switch from whole-turnover to selective invoice finance mid-contract?
Not with the same provider. Whole-turnover and selective are different legal structures. You would need to serve notice (typically 3-6 months) on your whole-turnover facility, continue paying fees during the notice period, then apply separately for selective funding. Most businesses only switch when contract renewal approaches or if customer complaints about debtor notification force a change.
What happens if I accidentally don't submit an invoice under a whole-turnover agreement?
Most whole-turnover contracts class this as a breach. Providers typically require all eligible invoices within 7 days of issue. Missing invoices can trigger default clauses, allowing the funder to freeze advances or call in the facility. Repeated omissions often result in increased fees or contract termination. Always integrate your invoicing software with the factoring platform to automate submission.
Do confidential invoice discounting facilities let me keep my bank details on invoices?
Yes. Confidential invoice discounting means customers pay your own bank account as normal. You then transfer collected funds to the finance company daily or weekly. This keeps the funding arrangement invisible to customers, unlike notified factoring where invoices display the finance company's payment details and include assignment notices.
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: 17 May 2026