Almost the same price.
Completely different shape
Run the same £34,000 through both for sixty days and they land within a few pounds of each other. So price is not the question. The question is whether what you need is a lump of money on a schedule, or a facility that moves with what you invoice.
No credit check to enquire.
One is a debt. The other is being paid earlier
- A loan is a fixed lump on a fixed schedule
You get the whole amount up front and repay it monthly whether trade is good or quiet. It is not tied to invoices, so it funds anything — stock, a hire, a tax bill, a gap with no ledger behind it.
- A facility revolves with your ledger
You draw against invoices as you raise them and the invoice clears the drawing when your customer pays. Invoice more and the facility grows with you, without reapplying for anything.
- The loan ends. The facility does not
When a loan is repaid it is gone and the next need means a fresh application and a fresh search. A facility is there for the next invoice, which is the real argument for it when the gap is a permanent feature of how you trade.
- But the facility ties you in
Notice periods of three to twelve months are normal, often with a minimum term, and usually a debenture over the company. A loan you can simply finish. The terms worth reading twice.
The same £34,000, over the same sixty days
Covering one 60-day gap. The loan is a 12-month facility at an illustrative 12%, settled after two payments; the invoice finance is a £40,000 invoice advanced at 85%.
Six pounds apart, which is the point of the table. The loan figure assumes early settlement is allowed with no penalty, and that is not universal — check the early repayment terms. Both sets of rates are illustrative.
- Stop comparing them on price. Over a single short gap there is almost nothing in it. Choose on whether the need recurs and whether you have a B2B ledger to lend against at all.
- No ledger, no facility. If you are paid on the spot by the public there is nothing to advance against, and the comparison is really between a loan and revenue-based funding.
Two different panels
An enquiry goes to whichever of them fits. The loan lenders and the invoice finance providers are not the same firms, which is most of the reason to ask a broker rather than a single lender.
- Funding CircleLoans
- iwocaLoans
- ShawbrookLoans
- FleximizeLoans
- Merchant MoneyLoans
- Lloyds / Bank of ScotlandInvoice finance
- AldermoreInvoice finance
- Bibby Financial ServicesInvoice finance
- Ultimate FinanceInvoice finance
Nine of the firms we work with, split by what they actually do. There are more on the invoice finance side — the full panel is named on the enquiry form.
Common questions
Which is cheaper, invoice finance or a business loan?
Over a single short gap, neither in any meaningful sense — our worked example puts them about six pounds apart on £34,000 for sixty days. Over a year of repeated gaps a facility usually wins, because you pay for the days you are actually drawn rather than for a whole term. Over one lump with no ledger behind it, the loan wins by default.
Can I have both at the same time?
Often yes, though the invoice finance debenture can block a second lender from taking one, so the order you arrange them in matters. Tell us if you already have a facility in place and we will work round it. More than one facility at once.
Does invoice finance show on my credit file?
The search does, and the facility is reported like any other credit agreement. The debenture is registered at Companies House and is public, which is the part people are usually surprised by. A loan registers nothing unless it is secured.
What if I invoice consumers rather than businesses?
Then there is no B2B ledger to advance against and invoice finance is out. A loan still works, and if you take card payments revenue-based funding flexes with your takings instead.
Which is faster?
A loan, usually, for a first facility — days rather than the weeks an invoice finance facility takes to survey your ledger and put the paperwork in place. Once a facility is live the position reverses, because drawing against an invoice is same-day and a new loan is a new application.
Can I move from one to the other later?
Yes, and plenty do, usually from loans to a facility as the ledger grows. Watch the notice period on anything you are already in before you commit to a date.
Tell us about the gap, not the product
Describe what you are covering and how often it happens. We will come back with which of the two actually fits, and what each would cost you.
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