How Bibby Factoring Works: Products, Costs, and Commitments

Bibby Financial Services (BFS) turns your unpaid customer invoices into cash, typically advancing up to 90% of an invoice’s value within 24 hours of submission and releasing the balance, minus fees, once your customer pays.¹ That is the mechanic behind how Bibby factoring works, but the shape of the arrangement, who talks to your customers, who absorbs a bad debt, and what you owe if you want out, depends on which product you sign up for and the terms inside the agreement.

The Day-to-Day Funding Cycle

Once your facility is live, the process runs on repeat. You upload invoices through BFS’s secure online portal.² Each invoice has to represent a completed, undisputed sale. BFS verifies it, sometimes by contacting your customer directly to confirm delivery and payment terms, and once the invoice clears verification, funds hit your account.

The advance is up to 90% of the invoice for standard factoring, and BFS states that for invoice discounting the advance is typically between 80% and 95%.³ The rest sits as a reserve, a buffer against returns, chargebacks, or disputes that surface before the customer pays in full. You cannot draw on the reserve during the collection period.

Collection happens one of two ways. Under standard factoring, BFS runs the credit control and follows up on overdue balances directly with your customer. Under invoice discounting, you collect the money yourself and remit it to BFS. When the invoice is fully paid, BFS reconciles the account, deducts its fees, and releases the remaining reserve to you.²

If an invoice cannot be verified or the customer flags a dispute, BFS will not fund it. And if a dispute arises after funds have been advanced, that invoice effectively becomes ineligible and the amount gets charged back to you, either deducted from future advances or repaid directly.

Which Bibby Product Fits Your Business

BFS runs several invoice finance products. The choice comes down to how much of the customer relationship you want to keep in your own hands.

Standard Factoring

BFS takes over credit control. Your customers are notified that payments go to BFS, and BFS chases the money.³ For a growing business without a dedicated accounts receivable team, this is often the better fit, because BFS is essentially running your collections department.

Confidential Invoice Discounting

You keep the sales ledger and continue collecting from customers yourself. The financing stays between you and BFS, so your customers typically have no idea their invoices have been funded.³ BFS will expect you to demonstrate the internal capacity to manage collections effectively.

Export Finance

For overseas sales, BFS runs a dedicated export product structured like domestic factoring but built for international trade. You can access funds against invoice values before the buyer has taken delivery, subject to the contract’s trade terms. BFS also offers foreign exchange services alongside export finance to simplify currency management.²

Recourse vs. Non-Recourse: Who Absorbs the Loss

This is the single most important term in the agreement, because it decides who takes the hit when a customer doesn’t pay.

Under recourse factoring, if a customer fails to pay within the funding period, BFS reassigns the debt back to you. BFS’s glossary defines the funding period as 90 days from the invoice date to 90 days end of month.⁴ The invoice belongs to you again, you absorb the loss, and you repay any advance BFS made against it.

Non-recourse factoring shifts customer default risk to BFS, but only under specific circumstances laid out in the agreement. BFS’s non-recourse terms define two types of protected events: insolvency events, such as a customer going into liquidation or administration, and non-payment events where a customer simply doesn’t pay within a defined protection period.⁵ BFS sets a credit limit for each customer, and any debt exceeding that limit becomes “disapproved” and falls outside the protection. BFS also decides which debts qualify as protected in the first place.

Non-recourse costs more because BFS is taking on more risk. Bad debt protection is available as a standalone add-on to any of BFS’s invoice finance products,⁶ and how it operates in practice is tied directly to the recourse structure you sign.

What It Costs

BFS charges a discount rate on each invoice, calculated on how many days the invoice remains outstanding after BFS funds it. The longer your customer takes to pay, the more the fee accumulates. Rates vary with your monthly factoring volume, the creditworthiness of your customers, and your industry’s risk profile. For context, BFS’s FastTrack product for smaller businesses charges a flat 3.5% over a 90-day funding period, which gives a rough sense of the pricing floor for simpler arrangements.

Beyond the discount rate, expect additional charges spelled out in the agreement:

Setup fees, a one-time charge covering due diligence and legal documentation.
Service or administration fees, either a flat monthly amount or a percentage of turnover.
Transfer fees on each wire.
Technology fees for portal access.

The total cost matters more than any individual line. A low discount rate with high administrative fees can end up more expensive than a higher rate with fewer extras. Before signing, add every fee together, measure it against the amount of funding you actually use, and compare that annualized number against a bank overdraft, a revolving credit line, or another factor’s offer.

What You’re Committing To

Getting into an agreement with BFS is easier than getting out of one, and this catches businesses off guard more than almost anything else in the process.

BFS offers contract terms of 12 or 24 months, or a flexible 30-day rolling contract.¹ The rolling option costs more day-to-day but lets you walk away with minimal notice.

For the fixed terms, BFS’s standard conditions require written notice of at least the “Minimum Notice Period” to terminate, and that notice can only be given after the initial minimum contract period has expired. The notice has to expire on the last day of a calendar month.⁷ Sign a 12-month contract and you cannot give termination notice until those 12 months have passed, and then you still have to sit through the notice period.

Early termination fees in the factoring industry can be substantial. Some factors average fees earned over the last 90 days and multiply by the months remaining on the contract; others use a percentage of the total approved facility, regardless of how much you actually drew. Either structure can produce a five-figure bill. Understand what early termination will cost before you sign, and negotiate the term if you can.

BFS also reserves the right to terminate the agreement itself following a “Termination Event,” which can include breaches of the agreement, material changes in your financial condition, or other triggers defined in the contract.⁷ When BFS terminates, all outstanding advances become immediately repayable. If your daily cash flow depends on the facility and BFS pulls it, you need a backup plan.

Nearly all factoring companies require personal guarantees from business owners, and BFS is no exception. If your business cannot repay what it owes and business assets have been exhausted, you are personally liable for the balance. The guarantee persists for the life of the agreement. Do not sign one without understanding exactly what you’re putting at risk.

Getting Approved

BFS evaluates both your business and your customers before extending a facility. The application asks for your company number, business name and address; business bank statements, management accounts including a profit and loss statement and balance sheet, and your most recent accounts; personal information for all business owners, including proof of identity and address; and how much funding you need and what you plan to use it for.

BFS will also want accounts receivable aging reports so it can see how long your customers take to pay and whether any invoices are already overdue. Because BFS’s security depends on your customers actually paying, it runs credit checks on your major account debtors. Poor credit profiles among key customers can lead to specific debtors being excluded from the facility, or the application being declined outright.

Concentration matters too. If one customer accounts for a disproportionate share of your invoices, BFS may cap how much it will advance against that customer. In the factoring industry, concentration limits commonly sit around 20% of total receivables, though the exact threshold varies by business and customer base.

BFS registers a legal claim over your accounts receivable as collateral. In the U.S. this is a UCC-1 financing statement; in the U.K. charges are registered at Companies House. If another lender already has a blanket lien on your assets, BFS will likely require that lender to subordinate its claim on receivables. Until the security position is clean, BFS will not release funds.

A Note on Accounting Treatment

How factored receivables appear on your books depends on whether the arrangement is recourse or non-recourse. Under generally accepted accounting principles, a recourse arrangement is treated as a secured borrowing, not a sale: the receivables stay on your balance sheet and the advance from BFS shows up as a liability. Non-recourse factoring, where you surrender all rights and bear no risk of loss, qualifies as a sale, the receivables come off the balance sheet, and any difference between invoice value and cash received is recognized as a loss on sale.

Tax authorities look at economic substance, not labels. The IRS instructs auditors to determine whether a factoring arrangement is genuinely a sale of receivables or is better characterized as financing with receivables as collateral.⁸ If you call it a sale but keep doing the collection work and holding most of the risk, an auditor may reclassify the transaction, which can change the timing and character of income and deductions. Work with your accountant so your books reflect what the arrangement actually is.

1
Bibby Financial Services. An Overview of Our Finance Solutions
2
Bibby Financial Services. Export Financing for Businesses
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Bibby Financial Services. Invoice Discounting vs Factoring
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Bibby Financial Services. Finance and Funding Glossary of Terms
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Bibby Financial Services. Non-Recourse General Conditions
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Bibby Financial Services. Bibby Financial Services Home
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Bibby Financial Services. Standard Conditions for the Purchase of Debts
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Internal Revenue Service. Factoring of Receivables Audit Technique Guide