{ "meta": { "title": "Why a valid invoice is excluded from invoice finance: common decline reasons and their sources", "page": "https://establishedfinance.co.uk/invoice-cannot-be-funded/", "published": "2026-09-24", "checked": "2026-11-01", "basisKey": { "funder-practice": "Written down in a funder's own client guide. One funder's wording; your agreement's schedule is what binds you.", "statute": "Set by legislation. The section or regulation is cited.", "our-reading": "Our reading of how the cited law applies. Not a funder's stated policy and not legal advice." }, "notes": "Compiled by Established Finance from the sources listed. Each row cites where the point comes from. Funder practice rows rely on one published funder guide (RBS Invoice Finance, May 2015), which is an old document; it shows how a funder categorises ineligible debts, not current terms from any funder. Percentages, day counts and limits are set in each facility's own schedule and are not given here, except the one example the guide itself gives." }, "sources": { "rbsif-2015": { "title": "RBS Invoice Finance, Factoring Guide (May 2015), 'Ineligible items which may affect the amount of funding available'", "url": "https://www.rbsif.co.uk/content/dam/rbs_co_uk/invoice-finance/PDFs/Not%20in%20use/Factoring_Guide-v5.pdf", "date": "May 2015" }, "si-2018-1254": { "title": "Business Contract Terms (Assignment of Receivables) Regulations 2018 (SI 2018/1254), regulations 1 to 4 and Explanatory Note", "url": "https://www.legislation.gov.uk/uksi/2018/1254/contents", "date": "Made 23 November 2018; applies to contracts entered into on or after 31 December 2018" }, "lpa-1925-s136": { "title": "Law of Property Act 1925, section 136 (legal assignments of things in action)", "url": "https://www.legislation.gov.uk/ukpga/Geo5/15-16/20/section/136", "date": "Current version on legislation.gov.uk" }, "ir-2016-r14-25": { "title": "Insolvency (England and Wales) Rules 2016, rule 14.25 (winding up: mutual dealings and set-off)", "url": "https://www.legislation.gov.uk/uksi/2016/1024/rule/14.25", "date": "Current version on legislation.gov.uk" }, "hgcra-s110": { "title": "Housing Grants, Construction and Regeneration Act 1996, section 110 (dates for payment)", "url": "https://www.legislation.gov.uk/ukpga/1996/53/section/110", "date": "Current version on legislation.gov.uk" }, "hgcra-s110a": { "title": "Housing Grants, Construction and Regeneration Act 1996, section 110A (payment notices)", "url": "https://www.legislation.gov.uk/ukpga/1996/53/section/110A", "date": "Current version on legislation.gov.uk" }, "hgcra-s113": { "title": "Housing Grants, Construction and Regeneration Act 1996, section 113 (prohibition of conditional payment provisions)", "url": "https://www.legislation.gov.uk/ukpga/1996/53/section/113", "date": "Current version on legislation.gov.uk" }, "govuk-retentions": { "title": "GOV.UK, Retention payments in the construction industry (consultation on the practice of cash retention under construction contracts)", "url": "https://www.gov.uk/government/consultations/retention-payments-in-the-construction-industry", "date": "GOV.UK page dated 26 February 2020 (latest update)" } }, "reasons": [ { "id": "dispute", "reason": "The invoice is in dispute", "funderView": "Any query from the customer about the invoice, or about whether it has to pay at all. The guide lists invoices in dispute among the ineligible debts held back from the availability calculation, and says a dispute left unanswered for 35 working days may be reassigned to the client at the funder's discretion.", "basis": "funder-practice", "sources": [ "rbsif-2015" ], "whatChangesIt": "Clear the query. Issue a credit note for anything you accept is owed back, or reply to the customer in writing and copy the funder. Once it is settled the invoice can come back into availability, on your agreement's terms.", "seeAlso": "" }, { "id": "overdue", "reason": "The invoice is past the facility's overdue cut-off", "funderView": "Invoices a set number of days past their due date are held back. The number is in the schedule to the agreement; the guide's own example is 60 days past the due date.", "basis": "funder-practice", "sources": [ "rbsif-2015" ], "whatChangesIt": "Collect it, or agree longer terms with the funder for customers who pay slowly but reliably. Check the cut-off in your own schedule rather than assuming a market norm.", "seeAlso": "" }, { "id": "concentration", "reason": "Too much of the ledger is owed by one customer", "funderView": "The concentration limit is a percentage of the whole ledger set by the funder. Any single customer's balance above that percentage is held back.", "basis": "funder-practice", "sources": [ "rbsif-2015" ], "whatChangesIt": "Because the cap is a percentage of the total, a larger ledger from other customers raises it in pounds. Otherwise ask the funder to review the limit for that customer; the answer is its credit decision.", "seeAlso": "/invoice-finance/" }, { "id": "customer-limit", "reason": "The customer's balance is over its funding or credit limit", "funderView": "Each customer can carry its own limit. The amount above it is held back from availability. On a non-recourse facility the funder also sets credit limits.", "basis": "funder-practice", "sources": [ "rbsif-2015" ], "whatChangesIt": "Request a limit increase, with the customer's full registered name and company number so the funder can assess it.", "seeAlso": "" }, { "id": "legal-action", "reason": "The funder has started legal action against the customer", "funderView": "Customer accounts where the funder has started legal action are ineligible, and the guide says the customer's limit is removed.", "basis": "funder-practice", "sources": [ "rbsif-2015" ], "whatChangesIt": "Little, for that customer, until the action ends. With the limit removed, new invoices to them are unlikely to fund either, so the real question is whether to keep selling to them on credit.", "seeAlso": "" }, { "id": "direct-payment", "reason": "The customer paid you instead of the funder", "funderView": "Customer balances subject to direct payment are held back. Payments received by you on assigned invoices must go to the funder straight away with the remittance.", "basis": "funder-practice", "sources": [ "rbsif-2015" ], "whatChangesIt": "Pass the payment on at once, with the remittance, and ask the customer to update its payee details so the next one goes to the funder.", "seeAlso": "" }, { "id": "contra", "reason": "The customer is also your supplier (contra or set-off)", "funderView": "A legal assignment passes the debt 'subject to equities having priority over the right of the assignee', so a customer with a set-off against you can generally raise it against the funder too. The Explanatory Note to the 2018 Regulations says a contractual right of set-off is not a restriction they override. If the customer goes into liquidation, mutual debts between you must be set off against each other.", "basis": "statute", "sources": [ "lpa-1925-s136", "si-2018-1254", "ir-2016-r14-25" ], "whatChangesIt": "Tell the funder about the cross-trading at the outset and keep both accounts with that customer settled. How much it reserves against the risk is the funder's policy, not a legal rule.", "seeAlso": "" }, { "id": "non-assignment-clause", "reason": "The customer's contract bans assignment of the debt", "funderView": "For contracts entered into on or after 31 December 2018, a term banning or restricting assignment of a receivable has no effect. It still has effect where the supplier (you) is a large enterprise or a special purpose vehicle at the time of assignment, and for the contract types excluded by regulation 4, including contracts concerning land, prescribed financial services, contracts where a party is acting outside a business, and contracts where no party is in business in the UK. The Explanatory Note says the Regulations deal with contracts under the law of England and Wales or Northern Ireland.", "basis": "statute", "sources": [ "si-2018-1254" ], "whatChangesIt": "Check three things: when the contract was signed, whether your last filed accounts put you in the small or medium-sized regime and outside a large group (sole traders and ordinary partnerships are never large enterprises), and which law governs the contract. If all three are on your side, the clause does not stop the assignment.", "seeAlso": "/tools/company-size-checker/" }, { "id": "application-not-due", "reason": "A construction application for payment has not yet become a sum due", "funderView": "A construction contract must set how and when payments become due, and require a notice, from the payer or a specified person, or from you where the contract says so, no later than five days after the payment due date, stating the sum considered due and how it was calculated. Before that, an application is your claim, not a fixed debt.", "basis": "our-reading", "sources": [ "hgcra-s110", "hgcra-s110a" ], "whatChangesIt": "Work to the contract's payment timetable and get the notified sum on paper. The notified sum is a figure a funder can check; the amount applied for may not be.", "seeAlso": "/construction-retentions-cis/" }, { "id": "retention", "reason": "The amount is a retention", "funderView": "Cash retention is held back under the construction contract and released later, on terms set by that contract. It is not overdue, so it is not treated like an ordinary late invoice.", "basis": "our-reading", "sources": [ "govuk-retentions" ], "whatChangesIt": "Track release dates and chase them when they fall due. A retention held by a contractor that becomes insolvent may not be recovered at all.", "seeAlso": "/tools/retention-release-estimator/" }, { "id": "conditional-payment", "reason": "Payment depends on your customer being paid by someone else", "funderView": "In a construction contract, a pay-when-paid term is ineffective unless the third party (or someone further up the chain) is insolvent, and making payment conditional on performance or a decision under another contract does not count as an adequate payment mechanism. Both rules apply only to construction contracts as the Act defines them.", "basis": "statute", "sources": [ "hgcra-s113", "hgcra-s110" ], "whatChangesIt": "If a funder has excluded construction invoices because of a pay-when-paid clause, point it to section 113. Where the upstream party is insolvent, the clause does work, and the invoice is genuinely at risk.", "seeAlso": "/construction-retentions-cis/" }, { "id": "foreign-law-or-debtor", "reason": "The customer is overseas, or the contract is under foreign law", "funderView": "The Explanatory Note to the 2018 Regulations says they deal with contracts under the law of England and Wales or Northern Ireland, and regulation 4 excludes contracts where no party is in business in the UK, so a ban on assignment in a foreign-law contract may still bite. Which countries a funder will take is its own appetite; we found no public rule or standard list.", "basis": "our-reading", "sources": [ "si-2018-1254" ], "whatChangesIt": "Read the contract's governing law clause and ask the funder for its list of acceptable countries before you sign, not after the first overseas invoice is excluded.", "seeAlso": "" }, { "id": "billed-ahead", "reason": "The invoice was raised before the goods or services were delivered", "funderView": "The funder takes the debt subject to the customer's defences. If the work is never done, the customer can refuse to pay the funder, so an invoice billed ahead of performance is a claim on work still to come.", "basis": "our-reading", "sources": [ "lpa-1925-s136" ], "whatChangesIt": "Invoice on delivery or on completion of a stage. Value built up before billing is a work in progress question, not a ledger one.", "seeAlso": "/professional-practices-wip/" } ] }