• 11 Mar

    Why Do Some Lenders Reject Invoice Finance Applications And How To Avoid It

    Why do some lenders reject invoice finance applications? We explore rejections in detail below, and we set out steps and pre-emptive measures you can take to avoid this happening to you. 

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    Let's start with why applications are sometimes declined.

    Why Do Some Lenders Reject Invoice Finance Applications (And How To Avoid It)

    Why do some lenders reject invoice finance applications, and how to avoid it.


    Introduction: The Unexpected Roadblock

    If you’re running a growing business in the UK and cash flow is tight, you might decide to apply for invoice finance to release more working capital. Turning your unpaid invoices into immediate working capital can be a perfect solution.

    Most applications for a facility are successful, but occasionally an applicant can be rejected.

    Some UK businesses face invoice finance rejections, often without fully understanding why. In this guide, we’ll uncover the common reasons lenders say no and, importantly, how to boost your chances of approval.

    Common Reasons Invoice Finance Applications Get Rejected (And How to Fix Them)

    Poor Credit History (Yours or Your Customers')

    In the UK, invoice finance providers don’t just assess your business, they also scrutinise your customers. In fact, in many cases they are more interested in the standing of your debtors than they will be of your own financial situation. If your debtors have a history of late payments, CCJs (County Court Judgments), or poor financial health, lenders may reject your application.

    See our related article: How To Get Invoice Financing With Bad Credit In The UK.

    How to avoid this:

    • Run credit checks on your customers before offering credit terms.
    • Focus on working with reputable clients who have a solid payment track record.
    • Consider invoice finance providers that offer bad debt protection, which covers you if a customer fails, and they check your debtors for you.

    If you have already been declined because of credit history, there may still be some funders that will provide you with a facility. If you look at facilities like invoice factoring, they are generally more available to businesses with a poor credit position. However, if your debtors are the problem, shop around as different funders will take a different approach to writing credit on debtors. Believe it or not, we have found many clients a funder that will provide a credit limit on a debtor that another provider rejected completely.

    If you have a poor credit history, prior failures or CCJs, see our article: Can I Access Invoice Finance With CCJs?

    Not Being A Homeowner

    Most invoice finance suppliers require that at least one of the directors of any client company is a homeowner. You may not even pass the first qualification hurdle with these providers if you don't own your own home. However, some providers don't require this and they will happily deal with directors in rented accommodation.

    Prime Debtor Concentrations

    Another reason for declining a business for invoice financing can be that they have a prime debtor concentration. This can be a single debtor situation where you only deal with one customer, or where you have a large percentage of your trade to one prime debtor. These situations don't suit every funder, but some will take on customers in both situations. Call 03330 113622 for an introduction to funders that will be able to help.

    How to avoid this:

    Low or Unstable Turnover

    Many UK invoice finance providers set a minimum turnover requirement, often around £100,000 per year. If your business turnover is lower or inconsistent, funders may view you as a risk or the arrangement as uneconomic. There are some funders that will accept clients with lower levels of turnover, or you could consider selective invoice finance which enables you to get funding against individual invoices without any lower threshold or minimums.

    How to avoid this:

    • If your turnover is below lender thresholds, look for alternative providers that specialise in small businesses or startup invoice finance.
    • Show proof of steady incoming work and long-term contracts.
    • Work with a broker (like FundInvoice) who can match you with lenders that fit your size.

    Disputed or Unverified Invoices

    Lenders want certainty that invoices will be paid. If your customers frequently dispute charges or delay payments, it creates a red flag.

    How to avoid this:

    • Make sure invoices are detailed, accurate, and sent on time.
    • Get written purchase orders or signed contracts before work begins. Get work signed off or delivery notes signed where possible.
    • Maintain good client relationships as happy customers are less likely to dispute invoices.
    • Ensure you have robust credit control procedures in place. See our: Credit Control Guide.

    Turnover Too High For A Smaller Provider

    All providers have criteria as to the size of businesses that they can help. Often this can be driven by the size of their own funding lines.

    If your turnover is large, it could be at the upper limit of what some smaller providers can handle. This can lead to additional scrutiny from the provider or even a late stage rejection as they may be extra cautious due to the size of the line you need.

    How to avoid this:

    Poorly Thought Through Businesses

    We have seen numerous businesses that have been poorly thought through, and this can be a reason for a finance company not proceeding. For example, when a business is projecting, say £25M turnover in its first year with no background in the sector, this can be a cause for concern amongst even factoring suppliers. Similarly, projecting significant growth without having prepared a business plan can raise alarm bells.

    How to avoid this:

    • Produce a well-reasoned business plan.
    • Keep your projections realistic. Over egging projections might seem like a way to get cheaper rates, but if you significantly underperform, you will likely fall foul of any invoice finance minimums or face charges being ramped up in year two. 

    See our related: Guide To Receivables Financing Costs.

    Industry Risks

    Certain industries in the UK, such as construction, and other contractual sectors, face higher rejection rates for invoice finance. This is because they often have complex contracts, payment delays, or retention clauses.

    How to Avoid This:

    • Look for sector-specific lenders who understand your industry’s challenges. For example, Construction Finance is designed to support construction businesses that may issue payment applications or have contractual terms.
    • Provide evidence of a consistent payment history from customers.

    Some sectors such as retail (which don't raise credit invoices to other businesses) will be better suited to other forms of funding such as a business loan or merchant cash advance (an advance against future credit card machine receipts).

    Legal or Compliance Issues

    If your business has unresolved legal disputes, outstanding tax liabilities, or a poor compliance record (such as not filing accounts on time with Companies House), financiers may be reluctant to approve funding.

    How to avoid this:

    • Keep company filings up to date on Companies House and HMRC - get them up to date before you apply.
    • Resolve any outstanding CCJs or legal disputes before applying.
    • Maintain clear, professional financial records that demonstrate a well-run business.

    You may also be able to get a facility approved on the basis that you undertake to resolve the issues. For example, paying off HMRC debts from the initial advance is sometimes a condition of granting a facility.

    Approaching Multiple Parties Directly or Via Several Brokers

    We have come across instances where a customer has contacted multiple providers or several brokers in an attempt to get a good deal or seek out all the options. This can harm how your application is perceived and make it harder to get approved. Funders often fear that a scattergun approach, applying to all and sundry, can indicate either financial desperation or a potential fraud.

    How to avoid this:

    • Either limit your applications to a handful of providers at most or seek the services of a single reputable broker with broad market access to make the comparisons for you.

    How to Boost Your Chances of Invoice Finance Approval

    These are some tips on avoiding rejection to boost your chances of invoice finance approval:

    • Know Your Numbers – Keep well-organised financial records and be ready to share turnover, profit margins, and cash flow statements.
    • Be Honest About Your Business – Don’t hide financial difficulties. Lenders appreciate transparency and may offer solutions if they understand your situation.
    • Use a Specialist Broker – A broker (like FundInvoice) can connect you with the right lender, saving time and increasing your chances of approval.
    • Consider Alternative Invoice Finance Models. If traditional invoice finance isn’t an option, look at:
    • Work with the Right Funder – Not all UK invoice finance providers have the same criteria. Some specialise in small businesses, startups, or high-risk industries. Choosing the right one makes all the difference.

    See our related article: What Criteria Do Lenders Consider When Approving Invoice Finance?

    Conclusions: Turning a Rejection into an Opportunity

    Rejection doesn't have to be the end of the road. With the right support, it can be turned into an opportunity to strengthen your business and find a lender who understands your needs.

    By addressing potential red flags, improving financial stability, and choosing the right lender, you can avoid being rejected and even turn a "no" into a "yes."

    Need help securing invoice finance? Contact FundInvoice 03330 113622 as we specialise in finding the right funding partners for businesses that have been rejected for invoice finance.

    By Glenn Blackman

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Examples of funders we work with:

funding invoice
apollo business finance
kriya
metro bank
igf
bibby