Invoice Finance: How to Unlock Cash Tied Up in Unpaid Invoices

What is Invoice Finance?

Invoice finance lets you release cash tied up in unpaid invoices. Immediately. Instead of waiting 30, 60, or even 90 days for your customers to pay, you receive up to 90% of the invoice value upfront, usually within 24 hours.

It's one of the most natural forms of business finance: you've already done the work, delivered the goods, or provided the service. Invoice finance simply accelerates the payment.

Invoice Factoring vs Invoice Discounting

There are two main types, and the difference matters:

Invoice Factoring

The finance company takes over your credit control. They chase your customers for payment, manage the ledger, and collect the money. You get the cash upfront; they handle the admin.

• Best for: Smaller businesses without a dedicated credit control team
• Your customers know: Yes. invoices are paid to the factoring company
• Typical advance: 80-90% of invoice value

Invoice Discounting

You retain control of your own credit management. The finance company provides the cash advance, but your customers pay you as normal. they never know you're using invoice finance.

• Best for: Larger businesses with established credit control processes
• Your customers know: No. it's confidential
• Typical advance: 75-85% of invoice value
• Usually requires: £500K+ annual turnover

Selective Invoice Finance

A newer option that lets you pick individual invoices to finance, rather than committing your entire ledger. No long-term contract. use it only when you need it.

• Best for: Businesses with occasional cash flow gaps or one large outstanding invoice
• Typical fee: 1-3% per invoice
• Contract: None. Pay per use

How Much Does Invoice Finance Cost?

Costs vary by provider and volume, but typically include:

For a business with £500K turnover using whole-ledger factoring, annual costs might be £7,500-£20,000. Selective invoice finance is cheaper if you only need occasional advances.

Who is Invoice Finance For?

• B2B businesses. you invoice other businesses (not consumers)
• Long payment terms. your customers take 30-90+ days to pay
• Growing businesses. winning new contracts but cash is locked in receivables
• Recruitment agencies. paying temps weekly but invoicing clients monthly
• Manufacturers and wholesalers. paying for materials upfront, invoicing on delivery
• Professional services. consultancies, agencies, IT services with project-based billing

Pros and Cons

✅ Advantages

• Immediate cash flow. money in 24 hours, not 30-90 days
• Scales with your business. the more you invoice, the more you can draw
• No property security needed. the invoices themselves are the security
• Professional credit control. factoring companies handle chasing payments
• Improves your balance sheet. reduces debtor days

❌ Disadvantages

• Customer perception. factoring means customers pay a third party (discounting avoids this)
• Concentration limits. if one customer is >25% of your ledger, limits may apply
• Contract length. whole-ledger facilities often have 12-24 month minimum terms
• Not for B2C. consumer invoices typically aren't eligible
• Dilution risk. if customers dispute invoices or take credit notes, it affects your facility

Invoice Finance vs Bank Overdraft

How to Get Started

1. Check eligibility. quick eligibility check, no credit search
2. Provide your aged debtor report. shows who owes you what
3. Get matched. we connect you with a suitable invoice finance provider
4. Start drawing funds. typically live within 5-10 working days