What makes invoice discounting confidential?
Confidential invoice discounting, sometimes called CHOCCS (Client Handles Own Collections, Confidential) or non-notification discounting, is structured so that your customers never know an external finance provider is involved. You continue to send invoices from your own accounts, chase payment yourself, and receive funds directly from your customers.
The finance provider operates behind the scenes. They advance funds against your ledger and you repay them as your customers pay you. The only visible change to your operations is that the funder holds a charge over your sales ledger as security.
Who uses confidential invoice discounting?
Confidential invoice discounting is most commonly used by established businesses with annual turnover above £500,000, a clean sales ledger, and a functioning in-house credit control team. It is particularly popular with professional services firms, manufacturers, distributors, and technology companies where maintaining the appearance of financial independence is commercially important.
It is also used by businesses that have outgrown factoring and want to transition to a more autonomous arrangement, retaining the cash flow benefits while removing the disclosed nature of the facility.
Benefits
The arrangement is invisible to your customers, preserving your reputation and commercial relationships. You retain full control of your credit control process and customer communications. The facility scales with your turnover, providing growing businesses with an automatic increase in available finance as sales grow.
- 100% confidential, customers never know the arrangement exists
- You retain control of all customer communications
- Scales automatically with turnover growth
- No fixed monthly repayments, unlike a business loan
- Typically lower cost than disclosed factoring
Eligibility and requirements
Lenders will require a robust credit control function and evidence that your debtor days are well managed. They will want to see a clean, spread sales ledger with no significant concentration risk from a single customer accounting for more than 25 to 30 percent of total debts.
Most lenders also require at least two years of filed accounts and a minimum annual turnover. Some specialist providers will consider businesses at lower turnover thresholds or with shorter trading histories, particularly where the sales ledger quality is strong.
Eligibility
- Minimum 12 to 24 months trading history
- Annual turnover typically above £250,000 (some lenders accept lower)
- B2B sales ledger with robust collections processes
- No single debtor concentration above 25 to 30% of total ledger
- Clean or manageable adverse credit history
Frequently Asked Questions
Is confidential invoice discounting the same as CHOCCS?
Yes. CHOCCS stands for Client Handles Own Collections, Confidential. It is one of the most common names for confidential invoice discounting arrangements in the UK.
Can I switch from factoring to confidential discounting?
Yes. As businesses grow, many transition from factoring to confidential discounting. The timing typically aligns with when you have established a competent in-house credit control function and have a sufficient turnover to meet lender thresholds.
What happens if my customer pays my personal account and not the funder's trust account?
Most confidential discounting arrangements include a trust account structure. If a customer pays your operating account rather than the designated trust account, you are obligated under the facility agreement to transfer those funds promptly. Failure to do so can constitute a breach of the facility.
Do lenders audit my sales ledger?
Yes. Funders will conduct periodic audits of your sales ledger to verify the validity of invoices submitted, debtor quality, and the accuracy of your reporting. The frequency depends on the facility agreement.