What is a notice of assignment and when must it be sent to your customers?
A notice of assignment is a formal written notification to your customer that the invoice has been assigned to your invoice finance provider and that payment must be made directly to the lender's designated bank account. In a disclosed or non-confidential factoring arrangement, notices of assignment are sent routinely with each invoice or batch of invoices. In a confidential invoice discounting arrangement, notices are not sent in normal operation but the lender retains the right to send them if the borrower defaults, at which point the lender takes over collections directly.
What this means for your business
For a UK SME using invoice finance, the notice of assignment is the mechanism that tells your customer where to actually send payment once you have raised finance against an invoice. It is a legal notification, not just a courtesy letter, and it formally transfers the right to collect that debt from you to your funder.
If you run a disclosed factoring facility, your customers will see these notices as standard practice, usually printed on the invoice or sent as a covering letter, and they simply pay the lender's account instead of yours. If you run a confidential invoice discounting facility, your customers continue paying you as normal and never see a notice of assignment, unless something goes wrong.
In that case, the lender can issue notices unilaterally and step in to collect payment directly from your customers, which is why it matters to understand the trigger conditions in your agreement.
Key points
- A notice of assignment tells your customer to pay the invoice finance provider directly rather than paying you.
- Disclosed factoring arrangements send notices of assignment routinely, often on every invoice or invoice batch.
- Confidential invoice discounting keeps the arrangement hidden from customers, so notices are not sent unless the lender needs to intervene.
- Lenders retain a contractual right to issue notices of assignment and take over collections directly if the borrower defaults.
- Customers cannot usually refuse to comply with a valid notice of assignment once it has been served.
Common pitfalls
SMEs sometimes assume a confidential discounting facility means notices of assignment will never be sent, but the right to serve them is written into almost every agreement as a default trigger. Missing payments to the lender or breaching covenants can prompt the lender to notify customers without further warning, which can be a shock if the business has not read its facility agreement closely.
Another common mistake is failing to update notice wording when a facility changes provider or is refinanced, leaving customers unsure who to pay. Businesses should also check whether notices need re-issuing when a customer's payment details or invoicing system changes.
Related questions
Can a customer ignore a notice of assignment and keep paying the original supplier?
No, once a valid notice of assignment has been served, the customer is legally required to pay the party named in the notice. Paying the original supplier after a valid notice does not discharge the customer's debt if the lender has not received the funds.
Does switching from confidential invoice discounting to disclosed factoring require new notices of assignment?
Yes, moving to a disclosed arrangement typically means notices of assignment are issued to all relevant customers going forward, since the funder becomes visible in the collections process. Your funder will usually manage this transition and specify the wording and timing.
What happens to existing invoices if a lender serves a notice of assignment after default?
The lender can typically notify customers about outstanding invoices covered by the facility, directing future payments to itself, and may take over communication about collections. The exact scope depends on the terms of the invoice finance agreement.
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: 19 July 2026