# Invoice Finance Jargon Explained Source: https://www.cashbookfinance.co.uk/insights/invoice-finance-glossary Last updated: 2026-10-26 Author: Bjorn Laku, Director & Chief Marketing Officer (https://www.bjornlaku.com/) Publisher: Cashbook Finance Limited > Understand invoice finance terminology with a plain-English glossary covering advance rates, recourse, concentration, reserves, fees and collections. Glossary FCA-registered UK lender FRN 782472 ## Invoice finance jargon, decoded: the only glossary you'll need [Invoice finance](https://www.cashbookfinance.co.uk/invoice-finance) comes with its own vocabulary, and the jargon can make a simple product feel complicated. Here are the terms that matter, in plain English. Written and reviewed by [Bjorn Laku](https://www.cashbookfinance.co.uk/bjorn-laku), Director & CMO. INV-2048 · Arden Health Group Illustration Cash received · this invoice A £50,000 invoice on 30-day terms - **Invoice value** £50,000 - **Paid to you, day 1–2** £45,000 - **When your customer pays** £4,000 Invoice value · £50,000 Illustrative: a 90% advance and a discount charge of about 2% of the invoice. Rates and advances vary by business, sector and customers. Check eligibility **£30m+** funded · **100+** UK businesses since 2019 · London SE1 - FCA **782472** - ICO **ZB545200** - Companies House **10723098** **In this guide** - The essentials - A few more you'll meet - Specialist terms ### The essentials - **Advance rate** - the percentage of an invoice paid to you upfront, commonly up to 90%. - **Service fee** - a percentage of turnover for running the facility. - **Discount charge** - a charge on the funds you actually draw, similar to interest. - **Recourse** - if a customer doesn't pay within an agreed period, the advance on that invoice reverses to you. - **Non-recourse** - the funder carries the risk if a customer becomes insolvent (usually for an extra fee). Check eligibility · About 2–3 minutes, no credit search. ### A few more you'll meet - **Eligible debt** - invoices that meet the facility rules and can contribute to funding availability. - **Borrowing base** - the value of eligible receivables after exclusions, reserves and concentration rules are applied. - **Dilution** - reductions to invoice value caused by credit notes, returns, rebates, disputes or other adjustments. - **Reserve** - an amount held back from the headline advance to reflect risk, eligibility or expected adjustments. - **Aged-debt report** - a ledger report showing unpaid invoices by customer and how long each balance has been outstanding. - **Debtor concentration** - the share of the ledger represented by one customer or connected customer group. - **Debtor credit limit** - the maximum amount of a customer’s debt that the funder is prepared to treat as eligible. - **Recourse period** - the period after which an unpaid funded invoice may become ineligible or be charged back to the business. - **Minimum term** - the contractual period for which a facility is expected to remain in place. - **Notice period** - the advance notice required to terminate or materially change a facility. - **Collect-out** - the process of allowing funded invoices to be collected and balances settled when a facility is ending. - **Reconciliation** - the regular matching of invoices, collections, credit notes and funding availability to the sales ledger. - **Disclosed vs confidential** - whether your customers are told a funder is involved. - **Notice of Assignment** - the notice telling a customer to pay the funder (in disclosed facilities). - **Concentration limit** - a cap on how much funding one large customer can represent. - **Selective / single-invoice** - funding chosen invoices rather than the whole ledger. - **Verification** - a light check that an invoice relates to genuine, delivered work. Check eligibility · About 2–3 minutes, no credit search. ### Specialist terms - **Applications for payment** - in construction, a contractor's claim for work done in a period, which is valued and certified before it becomes payable. [Read the guide to construction invoice finance](https://www.cashbookfinance.co.uk/insights/construction-invoice-finance-cis-retentions). - **CHOCs (client handles own collections)** - a disclosed facility where the business, not the funder, chases payment. [Read the guide to CHOCs](https://www.cashbookfinance.co.uk/insights/chocs-client-handles-own-collections). - **CIS deduction** - tax withheld under the Construction Industry Scheme from payments to subcontractors; funders lend against the net amount. [Read the guide to construction invoice finance](https://www.cashbookfinance.co.uk/insights/construction-invoice-finance-cis-retentions). - **Contra / set-off** - where a customer reduces payment by an amount it says you owe it. - **Credit insurance** - insurance against specified customers becoming insolvent or failing to pay, within limits. [Read the guide to recourse and non-recourse finance](https://www.cashbookfinance.co.uk/insights/recourse-vs-non-recourse-invoice-finance). - **Credit note** - a document reducing an invoice's value; frequent credit notes reduce funding availability. - **Debtor days (DSO)** - the average number of days customers take to pay. - **Facility limit** - the maximum funding available under a facility, whatever the ledger supports. - **Prepayment** - another word for the initial advance against an invoice. - **Retention** - part of a construction payment held back until completion or the end of the defects period; usually not funded. [Read the guide to construction invoice finance](https://www.cashbookfinance.co.uk/insights/construction-invoice-finance-cis-retentions). - **Supply chain finance (reverse factoring)** - early payment of approved invoices arranged by a large buyer. [Read the guide to supply chain finance](https://www.cashbookfinance.co.uk/insights/supply-chain-finance-vs-invoice-finance). Knowing these makes comparing quotes far easier - and if a provider can't explain a charge in plain terms, that tells you something too. For property-backed lending, see the [bridging finance glossary](https://www.cashbookfinance.co.uk/insights/bridging-finance-glossary). Check eligibility · About 2–3 minutes, no credit search. ### Invoice finance: a practical decision test Terminology matters because similar-sounding terms can change the economics or control of a facility. “Advance rate” is not the same as cash available, “confidential” does not mean invisible in every circumstance, and a low discount margin does not represent the [total cost](https://www.cashbookfinance.co.uk/pricing-decisions). Definitions should be tied to the contract and worked examples. #### Commercial fit Translate every term into an operational consequence: who contacts customers, when an invoice becomes ineligible, what triggers a reserve and when fees are charged. If the team cannot explain the mechanics plainly, it is not ready to manage the facility. #### Evidence and eligibility Ask the provider to apply key definitions to a sample aged-debt report. That exposes how concentration, ageing, disputes and credit limits affect availability more clearly than a glossary alone. #### Operational fit Create a short internal guide for finance and sales staff covering [eligible invoices](https://www.cashbookfinance.co.uk/eligibility), notification requirements, credit notes and collection responsibilities. Consistent language reduces reporting errors. #### Alternatives When two offers use different terminology, normalise them into the same [cash-flow model](https://www.cashbookfinance.co.uk/case-studies). Compare usable funds, total charges, service scope and termination obligations rather than matching labels. ### Invoice finance: model the downside, not just the headline Request a month-by-month example showing opening debt, new invoices, collections, reserves, fees and closing availability. Recalculate it independently. A transparent provider should be able to explain every movement. #### Where this can go wrong Ambiguous terms become expensive when the business assumes the most favourable interpretation. Do not rely on sales conversations for critical points. Make sure concentration limits, recourse, minimums and exit costs are explicit in the documents. Check eligibility · About 2–3 minutes, no credit search. ### Invoice finance: questions to ask before signing - Which invoices would be eligible, and what would reduce the available advance for reading invoice-finance terms correctly? - What is the all-in cost at expected utilisation, including minimums, reserves and exit terms? - Who owns customer communication, reporting, reconciliations and dispute escalation? - How does the facility behave if sales fall or the largest debtor pays late? ### Invoice finance: documents and controls to prepare Every invoice finance discussion goes better with the same core pack: a current aged-debt report, representative contracts and invoices with delivery or acceptance evidence, recent management accounts with a short cash forecast, and an honest schedule of credit notes, bad debts and customer concentration. We keep one maintained resource covering the full pack, the questions that surface the all-in cost, and what to monitor once a facility is live - [read the invoice finance preparation checklist](https://www.cashbookfinance.co.uk/insights/invoice-finance-preparation-checklist). This guide is general information, not a recommendation or an offer of finance. Suitability, availability, pricing and terms depend on the business, the debtor ledger and the proposed structure. #### See what your invoices could release Tell us how your business invoices and a director will give you a straight, no-obligation view on fit - usually within a day or two. Explainer #### Factoring and bad-debt protection Bjorn Laku Benefits #### 6 ways factoring supports growth Bjorn Laku Compare #### Factoring vs a business loan Bjorn Laku ### Use the terms in the order a facility actually operates Use the guide to organise the evidence and operating decision, not simply to compare product labels. #### Application Advance rate, eligible debt, concentration and recourse define the initial structure. #### Operation Borrowing base, reconciliation, dilution and reserves affect daily availability. #### Exit or termination Minimum term, notice, collect-out and security release affect how the facility ends. ### More guides on invoice finance - [Working capital benefits](https://www.cashbookfinance.co.uk/insights/working-capital-benefits) - [Invoice finance in London](https://www.cashbookfinance.co.uk/invoice-finance-london) - [Asset-based lending vs invoice finance](https://www.cashbookfinance.co.uk/insights/asset-based-lending-vs-invoice-finance) - [Export invoice finance](https://www.cashbookfinance.co.uk/insights/export-invoice-finance) - [Facilities that pair with invoice finance](https://www.cashbookfinance.co.uk/insights/funding-options-with-invoice-finance) - [Invoice discounting guide](https://www.cashbookfinance.co.uk/insights/invoice-discounting-guide) --- Cashbook Finance. Cashbook Finance Limited is registered with the Financial Conduct Authority under Firm Reference Number 782472. Company number 10723098. Registered office: Cumberland House, 24–28 Baxter Avenue, Southend-on-Sea, Essex SS2 6HZ. Registered with the Information Commissioner’s Office under reference ZB545200. All finance is subject to eligibility, satisfactory due diligence, credit approval and agreed terms. Invoice finance, trade finance and bridging finance may not be suitable for every business. The availability, structure, amount, pricing, fees, security requirements and completion timescales of any facility will depend on the applicant’s circumstances, the quality of the supporting evidence provided and our assessment of the proposed transaction. Any figures, examples, rates or timescales shown on this website are for illustrative purposes only and do not constitute an offer, commitment or guarantee of finance. Terms and conditions apply. Bridging finance is secured against property. Your property may be repossessed if you do not maintain repayments on a loan secured against it. Applicants should obtain independent legal, financial and tax advice where appropriate.