The development of factoring in banking follows both economic tides and an understanding of the role it plays within the asset finance market.

Invoice finance is the use of a financial services provider to supply a business capital that is owed to them from an outstanding invoice. It can still be the responsibility of the company to get this invoice paid at some point down the line. Factoring however, puts this responsibility onto the lender, who will then track down the outstanding invoice.


There has sometimes been wariness towards factoring in banking. This can be due to the collapse of large business with many outstanding invoices, which potentially leaves a bank losing huge sums of money. An example of this is in the collapse of construction company Carillion in early 2018.

A third of Carillion’s £1.5bn (€1.7bn) debt to banking partners was made up of “reverse factoring”, or supply chain finance facilities.

Among major institutes, RBS, Barclays, HSBC, Lloyds and Santander UK were owed around 60% of the construction’s company debt.

The £500m liability was accumulated under Carillion’s Early Payment Facility (EPF) programme, introduced by the company in 2013. Under the facility, Carillion’s banking partners would pay suppliers in the first instance, and then recover the capital from Carillion.

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There are still many players who engage in factoring and invoice finance, though they many not cover invoices that are as exposed as Carillion was in the past.

For instance, Positive Cashflow Finance offers facilities from £10k to £1m to businesses across the UK. As part of 1pm, Positive also provide access to a multi-product range of business finance solutions from asset finance, commercial loans through to vehicle finance.


The development of factoring in banking is also linked to advances in technology, reducing incidences of fraud and liability for invoice finance providers, as well as providing a more efficient service for customers.

London based fintech startup Hokodo was been awarded a €2m (£1.4m) grant by Horizon 2020, the funding programme for research and innovation run by the European Commission.

Awarded to Hokodo’s French office, the funding will enable the launch of its API-based invoice insurance offering in Europe, which it said could protect potentially millions of SMEs from unpaid invoices.

The Horizon 2020 grant will enable Hokodo to launch invoice protection and HokoScore in France and Germany within the next 12 months, as well as helping it to develop two new trade credit products for the SME market.