A CID facility advances cash against your sales ledger without your customers knowing. The commercial terms are industry practice rather than statute, and lending to a company sits outside the consumer credit perimeter — but the facility almost always creates a charge, and failing to register it at Companies House within 21 days makes the security void.
What it is, and the honest caveat
Invoice finance advances a proportion of the value of your outstanding invoices, so cash arrives when you raise the invoice rather than when the customer pays.
Two distinctions are conventional in the market. Factoring means the provider takes over collection and the customer deals with them directly. Invoice discounting means you keep collecting, and the facility sits behind the scenes. Confidential discounting means the customer is not notified of the assignment at all.
Be aware that these are trade terms, not statutory ones. There is no legislative definition of factoring, invoice discounting or confidentiality in this context, and no specific statutory framework governing invoice finance as a product. Anyone quoting a rule about what a "CID facility" must contain is describing market practice.
Is it regulated?
For a company borrower, no — and the reason is worth knowing precisely rather than assuming.
Entering into a regulated credit agreement as lender is a specified activity under article 60B of the Regulated Activities Order, but the borrower under a "credit agreement" must be an individual or a relevant recipient of credit. A limited company is neither. So lending to a company falls outside the regulated activity from the start.
Where care is needed is the borrowers who are caught by that definition. Article 60L brings in a partnership of two or three persons, where not all are bodies corporate, and an unincorporated body of persons. A sole trader is an individual. So an invoice finance facility to a two-partner firm or a sole trader is capable of being a regulated credit agreement in a way that the same facility to a company is not.
There is then a business-purpose exemption. Under article 60C an agreement is exempt where the lender provides credit exceeding £25,000 and the agreement is entered into wholly or predominantly for the purposes of a business. The Order supplies a declaration and presumption framework: a compliant borrower declaration of business purpose creates a presumption of business use, unless the lender knew or had reasonable cause to suspect otherwise.
So the perimeter question has a clean answer for companies and a fact-sensitive one for unincorporated borrowers — and it turns on the £25,000 threshold and the declaration, not on what the facility is called.
The charge registration trap
This is where real money is lost, and it is a company law point rather than a finance one.
A company creating a charge must deliver a statement of particulars to the registrar within 21 days beginning with the day after the date of creation. Where the charge is created or evidenced by an instrument, the registrar is only required to register it if a certified copy of the instrument is delivered with the statement. The 21-day period can be extended, but only by court order.
Miss it, and the consequence in section 859H is severe. The charge is void, so far as any security on the company's property or undertaking is conferred by it, against:
- A liquidator of the company;
- An administrator of the company;
- A creditor of the company.
And when a charge becomes void, "the money secured by it immediately becomes payable". Note what survives: the voidness is without prejudice to any contract or obligation for repayment, so the debt remains — as an unsecured debt, immediately due.
For a borrower that is the worst of both outcomes: the facility becomes repayable at once and the provider, now unsecured, has every incentive to enforce. Providers normally handle registration themselves, but the obligation sits on the company, and on a facility documented in a hurry it is worth confirming the filing rather than assuming it.
Does it come off the balance sheet?
This is the question finance directors actually want answered, and it deserves a straight statement of what is and is not settled here.
Whether the receivables are derecognised — removed from the balance sheet, with the advance treated as sale proceeds rather than borrowing — depends on the derecognition tests in the accounting standard the entity applies, and on the substance of the arrangement rather than its label. The pivotal commercial fact is normally who bears the risk of non-payment: a facility with full recourse to the borrower for bad debts looks very different from a genuinely non-recourse sale of receivables.
We are not going to quote paragraph numbers or assert an outcome here, because the relevant sections of the standards are not publicly available and the answer is genuinely fact-specific. What we will say is that it is a question to settle with your auditor before signing, not at the year end — because the presentation drives gearing, and gearing drives covenants.
For context on the framework: the current edition of FRS 102 was published in September 2024, and the Periodic Review 2024 amendments are effective for periods beginning on or after 1 January 2026, with early application permitted. Any analysis done against the pre-review text should be revisited.
What to check before signing
Five things, in order of how often they matter.
Recourse. Establish exactly when the provider can claw back an advance — customer insolvency, a disputed invoice, an invoice unpaid beyond a stated period. This drives both the commercial risk and the accounting answer.
The charge. Confirm registration within the 21-day window, and keep the certified copy of the instrument with it.
Covenants. If the facility does not achieve derecognition, it increases reported debt. Test that against existing banking covenants before, not after.
Concentration limits. Most facilities cap the proportion advanced against any single debtor, which is exactly the constraint that bites on a business with one dominant customer — the business most likely to need the facility.
Confidentiality in practice. A confidential facility depends on your own collection performance. If the provider loses confidence and moves to a disclosed basis, your customers find out at the worst possible moment.
And be clear about what invoice finance is for. It accelerates cash from a working ledger; it does not fix bad terms, disputed invoices or customers who cannot pay. Our guides to credit control and working capital cover the problems it will not solve, and debt advisory the wider funding options.
Acumon advises businesses on funding structures and their accounting consequences through financial modelling and management accounts work, with statutory audit where the balance sheet treatment needs settling. If a facility is being documented this month, the charge registration and the derecognition question are the two to resolve before completion.