A finance leaders’ guide to funding readiness and faster approvals
We know that for many UK businesses, invoice finance is an essential lifeline for maintaining liquidity. Many businesses feel they don’t qualify for invoice finance or would prefer to obtain more traditional funding instead, but they are really missing out. Invoice finance is a great product for any business with a sales ledger that deals with B2B debt. What better endorsement for your business than having the support of a reputable financial institution?
This guide outlines how to strengthen your receivables management, improve funding readiness and position your organisation for faster approvals and better terms from invoice finance providers.
Contents
- Why being invoice finance ready matters
- Why businesses are not approved
- Five steps to improve funding readiness
- Funding readiness FAQs
Why being invoice finance ready matters
There is more to invoice finance than just converting unpaid invoices into working capital. It’s also about credibility, process and discipline. Lenders are increasingly looking to assess the quality of invoices, not just the quantity. In particular, they want to know:
- Are the credit control processes consistent and documented?
- Do customers pay within agreed terms?
- Can the finance team demonstrate clear oversight and recovery processes?
We’ve seen profitable firms being declined or restricted because of aged debt, ledger inaccuracies or lack of process clarity. We’ve also worked with businesses previously refused invoice finance who have gone on to secure funding in future having got themselves in shape.
Why businesses are not approved
Ledgers that are hard to fund
These are defined as ledgers with more than 10% over 120 days. Too much overdue debt would go into the recourse.
High DSO
If DSO is more than 30 days over the average payment term, or over 75 days, then this can be classified as too high by many funders. Many will be looking at how long a business typically takes to get paid.
“If there’s too much debt in the end column, businesses are likely to be turned down for invoice finance in our experience.” Glen Morgan, CEO, itsettled
Poor order to cash process and lack of paper trail
This is particularly the case if the business has a lack of supporting documentation to justify debt and poor processes or sign off in place. Lenders want to see that they will be funding valid debt, with a paper trail to demonstrate this and collateral in place to show that the business is profitable. They will also want to see that reporting is up to date with HMRC.
Credit control and collections are not being actioned properly, or at all
In many cases, there is no formal collections process in place and no chasing taking place at all to recover aged debt.
Large amounts of queries being generated
The order to cash process has bottlenecks which result in lots of queries and therefore credit notes are required.
Lack of staff/resource or poor resource
The business has too few staff or poor staff who are not performing to the required standard. This can inevitably lead to staff feeling demotivated and less effective in their roles.
Customers with poor financial health
In certain cases, invoice finance providers don’t just assess the business applying – but also examine its customers. If the debtors have a history of late payments or are in poor financial condition, this could impact an application.
Case study: How we helped a £18m plumbing supplies company with a £4m ledger in desperate need of invoice finance
Having failed two business surveys, the business desperately needed to achieve funding. The 90-day-plus column was over £1.2m, and the total overdue debt was over £2m. The DSO had drifted up to 100 days.
The business was under staffed and had over 15,000 outstanding invoices dating back several years.
Actions: we took over the collections for 350 debtors and left the top 20 with the on-site team, but took over the management of the team to achieve the results required. We created credit policies and procedures and visited the site weekly to ensure progress was being made. We identified key positions that the business required, including assessing salary levels and assisting with the recruitment process.
Outcome: within three months the DSO was reduced to 64 days. The 90 day debt was reduced to £10k and the overdue debt to £17k. Responsibility for collections was handed by to the in-house team that had been assembled. An invoice finance facility was secured to allow for the growth of the business.
Five steps to improve your funding readiness
1. Audit your receivables ledger
Start with a full review of your ledger, this includes highlighting all overdue by 30, 60 and 90+ days. You should quantify disputed or part-paid invoices separately. Review credit notes, reversals and inconsistencies in your ERP or accounting software. Funders are likely to analyse these same metrics during due diligence and a clean accurate ledger is your stronger signal of funding readiness.
Get in touch for a free consultation to see whether you would qualify for invoice finance if you applied today.
2. Strengthen your credit control process
Invoice finance providers reward structure and predictability. They will want to see a robust automated process, not reactive chasing. Practical steps to take include:
- Implementing an automated reminder workflow to ensure consistent communication
- Introducing a tiered escalation policy for overdue accounts
- Reviewing customer onboarding and credit terms for transparency
- Documenting everything – lenders can often request policy evidence.
- Ensure you run credit checks on customers before you offer credit terms.
- Look for providers that offer bad debt protection which would cover you should a customer fail.
In addition:
- Start chasing aged debt early – before its due.
- Flush out queries and get them resolved
- Raise all credits promptly and ensure that chasing is relentless
- Implement a permanent process change that benefits collections
- Negotiate with customers
“All businesses need a Credit Policy and Formal collections process and it does not have to be complicated. The policy should include the Credit Application process, Credit Note sign off levels, Query Management reporting and how to treat overdue customers. The collections process should include letters, emails, phone calls all used in tandem with consistent timing set for each stage.” – Glen Morgan, CEO, itsettled
3. Resolve aged debt before applying
It sounds obvious, but ultimately, aged debt undermines funding potential. It signals instability to invoice finance providers and may reduce your borrowing base. Proactively clearing old invoices, especially those beyond 60 or 90 days, dramatically strengthens your application. This kind of short term intervention demonstrates that your business is both proactive and funding ready.
4. Prepare transparent reporting
Every invoice finance provider requests a detailed audit trail of your receivables. That includes:
- Aged debtor analysis (past 12 months)
- Customer concentration reports
- Dispute tracking logs
- Credit insurance coverage (if applicable)
Discrepancies between your ledger and your accounting platform can cause delays or rejection. Make sure your reports reflect real world data and not outdated exports.
5. Demonstrate control and resilience
Funders invest in confidence. They want to see that your business doesn’t rely on invoice finance as a crutch, but as a strategic enabler.
To prove control:
- Highlight how you’ve reduced day sales outstanding (DSO) and improved cashflow stability.
- Showcase technology or partner support that enhances reliability.
- Emphasise that your collections process protects relationships — a differentiator in the post-2026 compliance landscape.
Funding readiness FAQs
Why do invoice finance providers decline otherwise profitable businesses?
Many businesses are declined not because of performance, but because of:
- Too much aged debt, especially 120-day+ items
- High DSO (often 30+ days above agreed payment terms)
- Poor order-to-cash processes or lack of documentation
- Limited credit control activity
- Large volumes of unresolved queries or credit notes
- Under-resourced finance teams
- Customers with poor payment or financial health
These issues undermine lender trust in the recoverability of invoices.
What level of overdue debt becomes a problem for funders?
Funders typically flag a ledger as “hard to fund” when:
- 10%+ of the ledger is over 120 days, or
- There is a high proportion of overdue invoices sitting in the 60–90+ day columns
This affects your borrowing base and can lead to declined applications.
What DSO figure do invoice finance providers consider too high?
If your Days Sales Outstanding (DSO) is: more than 30 days above your average payment terms, or exceeds 75 days overall,
many funders will classify this as high risk.
How much do poor systems and processes impact approval?
A lot. Funders want to see a clear audit trail — including order confirmations, proof of delivery, credit notes, dispute logs and reconciled ledgers. Lack of documentation or inconsistent processes is a major reason for rejection.
Can a business be approved even if previously rejected?
Yes. A rejection isn’t permanent. Many businesses secure funding later after improving ledger quality, reducing aged debt and strengthening credit control processes. We’ve helped many businesses previously refused finance so we know it’s possible.
How quickly can a business become ‘funding ready’?
With focused external support, businesses can significantly improve funding readiness within three months. See our case studies to see how we’ve helped businesses within three months transform their processes.
What reporting will lenders want to see?
Typically:
- Reconciled ledger vs. accounting system
- 12-month aged debtor analysis
- Customer concentration reporting
- Dispute and query logs
- Credit insurance details (if applicable)
How does improving credit control help with invoice finance costs?
A cleaner ledger and lower DSO often lead to:
- Reduced need for additional borrowing
- Improved discipline = lower perceived risk = better terms.
- Lower service fees
- Higher advance rates
Can outsourced credit management help us become funding ready?
- Yes, specialist support can:
- Restore lender confidence
- Reduce aged debt quickly
- Resolve large volumes of queries
- Implement or repair credit policies and workflows
- Manage staff capability issues
Book a confidential funding readiness review with Glen Morgan to assess your ledger.
itsettled by Credebt is on the panel for most of the major invoice finance providers in the UK, so we know exactly what they are looking for. This means we can guarantee you will be approved following our help.