Invoice Finance
What is Invoice Finance?
Invoice finance is the ability to provide cash flow for your business either by factoring or invoice discounting against outstanding customer invoices.
The primary difference is that a factoring arrangement manages the credit control function for you whilst invoice discounting leaves you in control of this aspect.
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Similar to factoring but business retains responsibility for collecting customer payments.
Types of Invoice Finance
Invoice Factoring
- Key Features:
- Business sells unpaid invoices to a finance provider (factor)
- The lender typically advances 70-90% of the invoice value upfront
- The finance company collects payment directly from the customer
- The remaining balance (minus fees) is paid when the customer settles
- Best For:
- Small to medium businesses that want immediate cash flow
- Companies without a strong credit control team (since the lender handles collections)
- Businesses that don't mind customers knowing a third party is involved
Invoice Discounting
- Key Features:
- Similar to factoring, but the business retains responsibility for collecting customer payments
- More discreet - customers don't usually know an invoice finance facility is in place
- Advances typically 80-95% of invoice value
- Requires strong internal credit control
- Best For:
- Larger or more established businesses
- Companies that want to keep customer relationships private
- Businesses with good credit management systems
Benefits of Invoice Finance
Improved Cash Flow
Unlocks cash tied up in unpaid invoices quickly (often within 24–48 hours)
Helps pay suppliers, wages, and overheads without waiting 30–90 days for customers to pay
Supports Business Growth
Provides working capital to take on new contracts or larger orders
Allows reinvestment in marketing, stock, or expansion without cash constraints
Flexibility
Funding grows in line with sales, unlike traditional loans with fixed limits
Some providers offer selective invoice finance, so businesses only finance when needed
Outsourced Credit Control (Factoring)
Some facilities include chasing customers for payment, saving time and admin costs
Especially useful for smaller businesses without a dedicated accounts team
Confidentiality (with Discounting)
Invoice discounting keeps the facility hidden, so customers are unaware you’re using finance.
Alternative to Loans/Overdrafts
Easier to obtain than a bank loan, especially for growing businesses with strong sales but limited assets
No need to take on extra debt—funding is directly tied to invoices
Helps Manage Seasonal or Irregular Demand
Businesses with fluctuating income (e.g., construction, manufacturing, wholesale) can smooth out cash flow during quieter months
Strengthens Supplier Relationships
Being able to pay suppliers on time (or early) can lead to better terms and discounts
5 Steps for Invoice Finance
1
Get in touch
2
Meeting to assess your needs
3
Meet lender
4
In principal offer from lender
5
Release funds within 7 days
*Subject to the business providing all required information