Invoice finance

Why invoices trap cash

You’ve done the work. You’ve sent the invoice. Now you wait. Your customer has 30, 45 or 60 days to pay, and some take longer. Meanwhile, wages, suppliers, rent and tax keep coming. The business is profitable on paper but short of cash in the bank.

Invoice finance releases that cash early.

How invoice finance works

1. You invoice your customer as normal.
2. You submit the invoice to the funder.
3. The funder advances a large share of the invoice value, often within a day or two.
4. Your customer pays the invoice.
5. The funder deducts its advance and fees, and releases the balance to you.

Who suits invoice finance?

Good fit	Harder fit
Businesses invoicing other businesses or government	Consumer-facing businesses
30 to 90 day payment terms	Cash or card sales
Creditworthy customers	Customers with poor payment records
Completed work or delivered goods	Progress claims or disputed work

Labour hire, transport, wholesale, manufacturing, professional services and many trades are common users.

Single invoices vs whole ledger

Some businesses only need to fund the occasional big invoice. Single invoice finance suits them. Others want an ongoing facility that funds all invoices as they’re raised, which is usually called debtor finance.

The cost question

Invoice finance fees are usually a combination of a discount charge (based on how long the invoice is outstanding) and service fees. Compare the dollar cost with what the cash enables: meeting payroll, taking supplier discounts or accepting a bigger contract. For many businesses, it pays for itself.

Pairs well with payroll funding needs and purchase order finance. Ready to find out what your invoices could unlock? Enquire here.

An illustrative example

A labour hire business places workers with a large construction firm, which pays on 45-day terms. Invoice finance releases most of each weekly invoice immediately, so wages are paid on time. (Illustrative only.)

What else is invoice finance called?

Lenders, accountants and search engines don’t all use the same words. You’ll also see this entry described as Invoice discounting and Single invoice finance. In our A–Z index every one of those names points back to this page, so whichever term you searched, you’ve landed on the same thing. If a lender uses a name you don’t recognise, ask them to describe how the security, the term and the repayments work; that tells you far more than the label.

Where does it sit in the directory?

This entry lives on the trade, stock and asset shelf. It’s most often used for cash flow and working capital, stock, trade and invoices, and the security usually involved is invoices, stock or orders. It is one of the quicker entries to put in place when the paperwork is ready. Its closest neighbours are:

• Debtor finance — An ongoing facility against your whole debtor ledger that grows with sales.
• Trade finance — Pay suppliers now and repay once the goods have sold.
• Import finance — Pay overseas suppliers, freight and duty before the container lands.
• Export finance — Bridge the long wait between shipping overseas and getting paid.

To compare all of them at once, filter the Loan Finder by purpose and security.

Common mistakes to avoid

• Assuming every invoice qualifies. Funders exclude disputed, overdue, related-party and some progress-claim invoices, so check eligibility early.
• Overlooking concentration limits. If one customer makes up most of your sales, the available funding may be lower than expected.
• Not reading the minimum term. Some facilities have notice periods and minimum fees that matter if your needs change.
• Using it to mask thin margins. Trade and receivables funding works best when each transaction is profitable after finance costs.
• Poor record-keeping. Clean, up-to-date ledgers and stock records make approval smoother and limits higher.

What should I ask before signing up for invoice finance?

A short list of questions saves a lot of regret. Put these to any lender or specialist before you commit:

1. What percentage is advanced? The advance rate on eligible invoices or stock decides how much cash you actually receive.
2. Which items are excluded? Know the eligibility rules for overdue, disputed and concentrated debts or stock.
3. How are fees charged? Discount charges, service fees and minimums can be structured very differently.
4. Is the facility confidential? Decide whether you’re comfortable with customers knowing a funder is involved.
5. What’s the minimum term and notice period? Exit terms matter if your business changes direction.

If an answer is vague, ask again or ask for it in writing. Good lenders are happy to explain their terms clearly.

Turn invoices into cash

If customers are taking their time and your cash flow is feeling it, invoice finance could close the gap. Enquiring is quick and involves no credit check. A single specialist handles it; your details aren’t scattered to a crowd of funders.

Please tell us your typical invoice values, payment terms and main customers. Accurate details let us size the facility properly. Start your enquiry.