The umbrella term

Invoice finance, explained properly.

Invoice finance lets eligible businesses draw on the value of unpaid customer invoices instead of waiting for payment terms to run their course. It comes in several forms. We help you understand which, if any, fits your business.

Discuss your options How it works

Initial discussionNo obligationIndependent broker guidance

Invoice finance — illustrative

Eligible ledger

£250k

Advance rate

85%

Available

£212k

How the value moves

Invoice raised

£24.8k

Advance

£21.1k

Balance

£3.7k

Illustrative only. Every facility is priced and structured by the provider.

Funding grows

As your ledger grows

Best suited to

B2B businesses invoicing on credit terms

Funding basis

A proportion of eligible unpaid invoices

Main variants

Factoring, discounting, selective

Typical use

Working capital, growth, payroll, suppliers

What it is

What invoice finance actually is

When you invoice a customer on 30, 60 or 90-day terms, you have done the work but the money sits in your sales ledger until they pay. Invoice finance closes that gap. A finance provider advances a proportion of the invoice value soon after it is raised, then releases the balance, less their charges, once the customer settles.

Because the facility is secured against the invoices themselves, the amount available tends to rise and fall with your sales. That is why it is often described as funding that grows with the business, rather than a fixed loan that has to be renegotiated as you expand.

The term covers a family of products. The two most common are invoice factoring, where the provider typically manages collections, and invoice discounting, where you keep control of your ledger. Selective facilities allow you to fund individual invoices rather than the whole book.

In brief

Funding grows in line with your sales ledger

Available as factoring, discounting or selective facilities

Often used where customers pay on 30 to 90+ day terms

How it works

Invoice finance step by step

You raise invoices as normal

You deliver goods or services and invoice your customer on your usual credit terms.

The provider advances a proportion

An agreed percentage of the invoice value is made available to you, usually within a short period of the invoice being submitted.

Your customer pays

Depending on the facility, either you or the provider collects payment when the invoice falls due.

The balance is released

The remaining value is passed to you, less the provider's fees and any interest charged on the advance.

Who it suits

Businesses this tends to fit

Often suits

Businesses selling to other businesses on credit terms
Companies growing faster than their cash flow can comfortably support
Firms with a small number of large customers and lumpy receipts
Businesses with seasonal peaks that strain working capital
Companies already using invoice finance that want a better-fitting facility

Typical eligibility

You invoice other businesses (or public sector bodies) rather than consumers
Invoices are raised for completed work or delivered goods
Your customers have a reasonable payment record
Your sales ledger is reasonably well maintained

Advantages

Funding tied to what you have already earned

The facility reflects your sales ledger, so availability tends to grow as turnover grows rather than being capped at a fixed amount.

Quicker access to cash tied up in invoices

Rather than waiting for payment terms to expire, a substantial part of the invoice value can usually be drawn far sooner.

Flexible structures

Facilities can be shaped around whether you want collections support, confidentiality, bad debt protection or the ability to pick which invoices to fund.

Can work alongside other funding

Invoice finance is often used together with asset finance, overdrafts or term loans as part of a broader working capital arrangement.

Things to weigh up

It is not free money

Providers charge a service fee and a discount charge on the funds advanced. The overall cost depends on your turnover, debtor quality and the structure chosen, and should be weighed against the value of having the cash sooner.

Not every invoice is fundable

Providers typically fund invoices for completed work or delivered goods, owed by creditworthy business customers. Stage payments, consumer sales and disputed invoices may fall outside the facility.

Contract terms matter

Notice periods, minimum fees, concentration limits and personal guarantees vary between providers. Understanding these before signing is a large part of what we help with.

Compare

Factoring or invoice discounting?

The two main forms of invoice finance look similar on paper but suit different businesses. Here is how they differ in practice.

Dimension

Invoice factoring

Invoice discounting

Who collects payment

The provider's credit control team

Your own team

Customer awareness

Usually disclosed

Often confidential, subject to provider criteria

Control of customer relationships

Shared with the provider

Retained by your business

Demands on your systems

Lower

Higher: accurate ledger and reporting expected

Service fee

Generally higher, reflecting the collections service

Generally lower

Often suits

Smaller or growing firms, lean back offices

Established firms with strong processes

Invoice factoring in detail Invoice discounting in detail Read the guide

The other forms it takes

Funding plus collections

Invoice Factoring

Release cash against unpaid invoices while the provider manages credit control and collects payment from your customers.

How factoring works

Funding, you keep control

Invoice Discounting

Draw funds against your sales ledger while continuing to run your own credit control, often without customers being aware.

How discounting works

Fund what you choose

Selective Invoice Finance

Finance individual invoices or specific customers as the need arises, rather than committing your whole sales ledger.

How selective finance works

Questions

Invoice finance questions, answered straight

How much of an invoice can be funded?

It depends on the provider, your sector and the quality of your debtor book. Providers generally advance a substantial proportion of the invoice value upfront, with the remainder released once the customer pays. We will explain what is realistic for your circumstances before you approach any provider.

Will my customers know I am using invoice finance?

It depends on the type of facility. Factoring is usually disclosed, because the provider deals with your customers to collect payment. Invoice discounting can often be arranged confidentially, so customers continue to pay you as normal. Confidentiality is subject to the provider's criteria.

Is invoice finance the same as a loan?

No. A loan gives you a fixed lump sum to be repaid over time. Invoice finance releases money against invoices you have already issued, so the amount available moves with your sales ledger and there is no fixed repayment schedule in the same sense.

Can I use invoice finance if I already have a bank overdraft?

Often, yes, though the existing lender may hold security over your debtors which would need to be considered. This is a common situation and one we can help you work through.

What does a broker actually do?

We take the time to understand your business, explain the facility types in plain terms, identify providers whose appetite matches your profile, and support you through the application. Our aim is a facility that suits how you actually operate, not simply the first offer available.