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• 24 Feb

  Invoice Finance Declined What To Do Next UK Step By Step Guide

  If you have been declined for invoice finance, it is stressful, but it is rarely the end of the road. A decline usually means the lender was not comfortable with something specific in your debtor book, invoices, or company profile. In many cases it simply means the provider was not the right fit for your business. The next step is to identify the exact reason, fix what is fixable quickly, and approach the right type of funder next.

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  Quick Answer

  

  If invoice finance has been declined, ask for the exact reason in writing, check your sales ledger for disputes and aged debt, confirm customer concentration levels, and then consider alternatives such as selective invoice finance, factoring or a different lender that is comfortable with your particular profile.

  Step 1 Get The Exact Decline Reason In Writing

  Do not settle for a vague answer like outside policy. Ask the lender exactly what triggered the decline. It might include any of these:

  • Debtor credit concerns or a low credit limit on one or more customers
  • Customer concentration where too much of your ledger is with one debtor or a small number of debtors
  • Aged debt issues, such as invoices older than 90 to 120 days
  • Disputed invoices, unverified delivery, or missing paperwork
  • Sector concerns such as construction style contracts, retentions, deposits or applications for payment
  • Companies House or HMRC issues
  • Creditor issues
  • Turnover being too low, too inconsistent, or too early stage

  Ask them what documents they need to reconsider, and whether the decline was simply not for them or a hard no for risk reasons.

  See our more detailed article on this topic Why Do Some Lenders Reject Invoice Finance Applications And What To Do To Avoid It.

  Step 2 Do A 48 Hour Triage On Your Ledger

  Before you approach anyone else, do a quick clean-up and check your MO or method of operation. These are the items that most often sink an invoice finance application.

  • Disputes any invoice under query is usually ineligible, and a pattern of disputes can raise alarm bells
  • Aged debt check the percentage that is over 60 days and over 90 days
  • Proof of delivery signed timesheets, delivery notes or completion sign-off
  • Credit notes frequent credit notes can look like disputes in disguise and can dilute the value of your ledger to a prospective funder
  • Debtor concentration work out what percentage of turnover is your top customer or customers
  • Set off risk where a customer can offset claims against invoices, such as contra balances

  If you spot obvious issues, fix them first before reapplying to other providers. Often, a small change in housekeeping can alter the outcome.

  Step 3 Match The Fix To The Reason You Were Declined

  Declined Due To Debtor Credit Or Low Credit Limits

  Invoice finance providers usually care as much about your customers as they do about you. If a key customer has a weak payment profile, some lenders will not fund that debtor, while others may still help with tighter limits.

  • Ask whether the lender declined the whole facility or only certain debtors
  • Provide updated information on the debtor, including payment evidence
  • Consider a lender with a different approach to credit limits or one that can also provide protection against bad debts. Some will allow you to assign the benefits of your own credit insurance policy to them to help boost their security.

  See also bad debt protection.

  Declined Due To Customer Concentration

  If one customer represents a large share of the ledger, some lenders see it as a single point of failure. Others will still fund, depending on the debtor and contract structure.

  • Explain why the concentration exists and whether it is temporary
  • Provide contract evidence and trading history with that customer
  • Consider selective invoice finance if you only need to fund a few invoices

  Remember, different funders will take a different approach to funding debtor concentrations. See this case study about how we solved a debtor concentration issue for one client.

  Step 4 What To Try Next

  If one lender has declined the application, it does not automatically mean all funders will say no. Options that may still work include.

  • Invoice factoring where criteria can differ from confidential facilities
  • Selective invoice finance for funding individual invoices or single debtors
  • Sector specialist lenders that understand your industry
  • A broader asset-based lending structure, if appropriate

  If these alternative funding options still don't solve the issue, you may be able to qualify for other forms of business financing, such as a traditional business loan. This may be more appropriate if there are issues with your sales ledger that make it an issue to fund. If you have alternative sources of security, such as property, this can make loans easier to qualify for, and this can completely remove sales ledger problems from the qualification process.

  Step 5 When Reapplying Makes Sense

  Reapplying immediately with the same information rarely works. However, approval chances often improve once the underlying issue has been addressed. In many cases, a short period of improved trading, cleaner ledgers, or updated filings can materially change the outcome. In some cases, simple changes such as introducing more evidence of debt (a signed delivery note or staff timesheet) can be all that is required to make your debts fundable.

  How FundInvoice Can Help

  Being declined by one provider often just means the fit was wrong. Different funders have very different appetites for concentrations, sectors and credit profiles. FundInvoice can help identify lenders more likely to support your situation.

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  Frequently Asked Questions

  Does being declined for invoice finance mean I cannot get funding?

  No. Different invoice finance providers have different criteria. A decline from one lender often reflects a poor fit rather than a fundamental problem with the business. Many UK companies are successfully funded after an initial rejection - in fact, this is where FundInvoice specialises in helping UK companies.

  Can I apply to another lender after being declined?

  Yes, but it is best to understand the exact reason for the decline first. Approaching another provider with the same issues unresolved can lead to repeated rejections. A targeted approach usually works better, and you need to know which funders can help with your specific circumstances. Also, be careful about credit searches. They are not normally conducted at the outset (rather before all parties proceed), but multiple searches in a short period can leave a footprint on your credit file and harm your chances of approval. 

  How long should I wait before reapplying for invoice finance?

  This depends on the reason for the decline. If the issue was documentation or lender fit, reapplying quickly may be possible. If it relates to aged debt, turnover or credit profile, a short period of improved trading may help.

  What is the most common reason invoice finance is declined?

  Common reasons include poor debtor credit quality, high customer concentrations, disputed invoices, or compliance issues such as late filings. The exact trigger varies between providers, and not all providers will take the same view on any of these issues. There are specialists who help distressed businesses.

  Can a broker help if invoice finance has been declined?

  Yes. A specialist broker can identify lenders whose criteria better match the business profile and can help you present the application in the strongest possible way.

  By Glenn Blackman