Invoice Finance When Buying a Debtor Book: A UK Buyer's Guide

Of everything an administrator or liquidator might have for sale, the unpaid invoices look the most appealing: they're already earned, the customers already exist, and the cash is "just" waiting to be collected. But buying a debtor book out of a distressed company is one of the most misunderstood transactions in the market. The book is frequently already assigned to a funder, the customers may dispute what they owe, and even when you can buy it, you'll need cash on completion that the debts themselves won't produce for weeks. This guide explains how it works and where invoice finance fits.

In short: a debtor book (the company's unpaid customer invoices) can only be bought if it still belongs to the company. Many distressed businesses have already sold or charged their ledger to an invoice finance provider, who collects first. Where the book is genuinely available, buyers typically purchase it at a discount to face value and fund the purchase with a new invoice finance facility, which advances against the invoices once they are properly assigned to you. Check who owns each debt before you price anything.

What "buying a debtor book" actually means

A debtor book (or sales ledger) is the list of invoices a business has issued but not yet been paid for. Buying it means acquiring the right to collect those debts. You pay the seller less than face value; you collect the full amount (or as much as customers actually pay) and keep the difference.

It sounds simple, but a debt is a legal right, not a physical asset, and three things decide whether it's worth anything to you:

• Who owns it. Is it the company's to sell, or already with a funder?
• Whether it's collectable. An invoice for goods that arrived late or faulty is an argument waiting to happen.
• Whether you can enforce it. That depends on a valid assignment and notice to the customer.

Invoice discounting vs factoring: the two products you'll meet

Both products advance cash against the debtor book. UK Finance describes the difference this way: factoring includes sales ledger management and credit control by the funder, while invoice discounting is a more confidential facility where the business runs its own ledger and credit control. In both cases, funding grows with sales rather than being fixed at the outset. UK Finance reports that members' invoice finance and asset-based lending facilities involve well over £20 billion of outstanding advances to tens of thousands of UK businesses, so there is no shortage of providers used to the process.

For a buyer, the practical point is that both products can be arranged against a debtor book you've acquired, and both can double as ongoing working capital. Where the target also holds plant, stock or property, the broader facility is asset-based lending.

Step one: find out who already has first claim

Most trading companies of any size finance their ledger. If the target has an invoice finance facility, one of two things is usually true:

• Under factoring, the debts have typically been assigned outright to the funder, so they are the funder's property and not the company's. The administrator has nothing to sell.
• Under invoice discounting or a charge, the funder holds security over the ledger and will collect or be repaid first when the company fails.

Either way, the proceeds go to repay the facility, not to the administrator's estate, and not to you. Our guide to buying a recruitment agency in administration shows exactly how this plays out in a sector where the sales ledger is the biggest line on the balance sheet. Charges registered at Companies House are the first place to look; the administrator and the funder can confirm the rest. This sits within the wider due diligence checklist for a distressed business.

If the funder owns the ledger, your realistic options are to negotiate a discounted buy-out of specific, large and undisputed invoices, or to leave the old ledger alone and build a fresh one.

Step two: get a valid assignment and tell the customers

Where the debts are genuinely available, ownership has to transfer properly. Under section 136 of the Law of Property Act 1925, a legal assignment of a debt must be in writing, signed by the assignor, absolute rather than by way of charge, and express written notice must be given to the debtor. Until customers have been told, they can still pay the old company, and the money will be hard to trace.

Two further points matter in practice:

• Some customer contracts ban assignment of the debts they create. Regulations that took effect in 2018 override many of those bans for contracts with smaller suppliers, but exclusions apply, so ask your solicitor to check the contracts behind the biggest invoices.
• Customers can raise the same defences against you that they could have raised against the seller, such as disputes over quality or set-off for money the seller owed them. A buyer takes a debt subject to those arguments.

Step three: fund it, and fund the gap

A new invoice finance facility advances cash against eligible invoices that have been assigned to the funder. In the market generally, advance rates of around 70–90% of eligible invoices are commonly quoted (see our guide to acquisition finance in the UK). Eligibility is judged by the funder and typically excludes disputed, aged or concentrated debts.

The gap most buyers under-size is the first few weeks. If you buy a ledger at a discount, you still need to pay for it on completion, and a new facility needs time to be set up, audited and drawn on. If you instead start trading afresh without the old ledger, your new facility has nothing to draw against until invoices have been raised and seasoned. Either way, you need working capital to cover wages, suppliers and VAT while that gap closes. That's the same point made in how to fund a distressed business acquisition, and it should be in the funding request, not discovered after completion.

A quick checklist before you bid for a ledger

1. Who owns each debt? Check Companies House charges and ask the administrator for the funder's position in writing.
2. How old and how concentrated is the book? Aged debts and one dominant customer both depress what a funder will advance.
3. Are there disputes, credit notes or set-off claims? Ask for the customer correspondence on the largest invoices.
4. Is assignment permitted and can you give valid notice? Have the contracts checked.
5. Can you collect? If the customers are also your key accounts, collection calls double as relationship management.
6. Is the price right? Our guide to how to value a distressed business covers the discount logic.

Frequently asked questions

Can you buy a debtor book out of administration? Sometimes. If the debts are still the company's property and not assigned or charged to a funder, an administrator can sell them as part of an asset sale. Many are already spoken for, so check ownership first.

What's the difference between invoice discounting and factoring? Factoring typically includes ledger management and credit control by the funder; invoice discounting is usually confidential, with the business managing its own collections. Both advance cash against unpaid invoices.

What happens if customers keep paying the old company? Until customers have received written notice of assignment, they can discharge the debt by paying the original creditor. That's why notice should go out promptly after completion, and why you need clear instructions on where payments should go.

How much will an invoice finance provider advance? It varies by provider, sector and the quality of the invoices. Advance rates of roughly 70–90% against eligible invoices are commonly quoted, with disputed, aged or concentrated debts usually excluded.

Is a debtor book a good way to buy into a distressed business? It can be, as part of a wider deal, but it's rarely the whole deal. Treat it as one asset to value and fund separately from the trading business and equipment.

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Sources: UK Finance, Invoice Finance and Asset-Based Lending; Law of Property Act 1925, section 136, legislation.gov.uk. Advance rates are indicative of the UK market and vary by lender.

This article is general information, not financial, investment, legal, insolvency or tax advice, and is not a financial promotion or an offer of finance. Funding routes referenced are indicative only and subject to eligibility, credit assessment, lender appetite, security, affordability and full underwriting. Always take professional advice before entering any finance arrangement or acquisition.

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Social companions (do not publish to CMS)

LinkedIn post 1

The unpaid invoices look like the easiest asset in a distressed deal. They're often the one asset you can't have.

Most trading companies finance their sales ledger. Under factoring, the debts have usually been assigned to the funder outright. Under invoice discounting, the funder holds a charge over them.

Either way, when the company fails, the funder collects first.

So before you price a debtor book, ask three questions:

1. Who owns each debt?
2. Are any of them disputed?
3. Can I give customers valid written notice of assignment?

If the answer to the first is "the funder", you're not buying a book. You're starting a new one, with an empty ledger and a working capital gap to fund.

Full guide: distresseddealflow.co.uk/insights/invoice-finance-buying-a-debtor-book

#invoicefinance #distressedacquisitions #acquisitionfinance

LinkedIn post 2

You buy a debtor book at a discount. Completion goes smoothly. Then the customers keep paying the old company.

Under section 136 of the Law of Property Act 1925, a legal assignment of a debt needs three things: it's in writing, it's absolute, and the customer is given express written notice. Until they've been told, they can still discharge the debt by paying the original creditor.

Practical rules for any ledger purchase:

• Draft the notice before completion, send it the same day.
• Tell customers exactly where to pay.
• Remember they can raise the same disputes against you that they could against the seller.

The funding is the easy part. The paperwork decides whether you collect.

How invoice finance fits, and the day-one gap to plan for: distresseddealflow.co.uk/insights/invoice-finance-buying-a-debtor-book

#invoicefinance #debtorbook #businessacquisition

Short-form video script — "You can't buy what a lender already owns" (60–90s, ~175 words)

HOOK: The most valuable thing in a failed company might be the one thing you can't buy.

BODY: It's the unpaid invoices. The debtor book. It looks like cash waiting to be collected. But most trading companies fund their day-to-day cash with invoice finance. Under factoring, those debts have usually been assigned straight to the lender. Under invoice discounting, the lender holds a charge over them. When the company collapses, that lender collects first. Not the administrator. Not you. So check who owns each invoice before you put a number on it. If the book is genuinely available, you can often buy it at a discount and fund it with a new invoice finance facility. But the law says customers must be told in writing that the debt has moved, or they can keep paying the old company. And if you start with a fresh ledger instead, your new facility has nothing to draw on until your first invoices are raised. Budget for that gap on day one.

CTA: Full guide on the site, link in bio. Distressed Deal Flow.

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Publish checklist (for Ciaran)

• Verify before publishing: UK Finance figure (well over £20bn outstanding advances to tens of thousands of UK businesses) and the factoring/discounting definitions were taken from the live UK Finance page on 1 Oct 2026. The s136 LPA 1925 requirements were checked on legislation.gov.uk. The reference to the 2018 assignment-of-receivables regulations is deliberately general (I could not open the legislation text); have a solicitor or the source (Business Contract Terms (Assignment of Receivables) Regulations 2018) confirm the wording before publishing.
• The 70–90% advance range is described as commonly quoted and indicative, consistent with articles 28 and 31. No lender or rate is named. Quick compliance eyeball advised as this is a funding piece.
• Paste frontmatter fields into the Supabase posts columns per CONTENT-WORKFLOW-SOP.md (title, slug, metaTitle → meta_title, metaDescription → meta_description, excerpt, focusKeyword → focus_keyword, tags, category "Funding", readingTime → reading_time). Body = everything from the H1 down to the "Social companions" separator. Do not paste the social section or this checklist.
• Internal links used (all exist in folder): asset-based-lending-distressed-acquisitions (31), recruitment-agency-in-administration (30), due-diligence-distressed-business (09), acquisition-finance-uk (28), fund-distressed-acquisition (06), how-to-value-a-distressed-business (22).
• Add a link DOWN to this post from 1–2 older posts: article 28 (acquisition-finance-uk), in the "Invoice finance providers" section; and article 31 (asset-based-lending), where invoice finance is defined as the narrower related product. Optional: article 30 (recruitment agency) in the debtor-book section.
• Drop the -DRAFT suffix and set publishedAt once reviewed.
• Request indexing for https://distresseddealflow.co.uk/insights/invoice-finance-buying-a-debtor-book in Google Search Console after publishing.
• Next in backlog: "How Much Deposit Do You Need to Buy a Business?" (last Wave 4 piece). September 2026 insolvency statistics are expected around 20 October — prioritise that post then.
• Housekeeping: a stray file 31_asset-based-lending-distressed-acquisitions-DRAFT.md.b64 is sitting in this folder — safe to delete.