Release cash from your sales ledger without waiting for customers to pay
If your business raises invoices, there is often a gap between completing work and receiving payment. Payment terms of 30, 60 or even 90 days are common, particularly when dealing with larger customers or public sector organisations. That gap can put real pressure on cash flow, even when the business is profitable and growing.
Invoice finance allows you to access a proportion of the value of your unpaid invoices before your customers pay. Rather than waiting, you release cash from the work you have already done.
How invoice finance works
You raise an invoice and notify the lender.
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The lender advances a percentage of the invoice value, typically between 70% to 90%.
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When your customer pays, the remaining balance is released minus the lenders fee.
​Invoice Finance is linked to your sales ledger so it tends to grow as your business grows. This makes it well suited to growing businesses, where a fixed loan amount may quickly become insufficient.
Factoring and Invoice Discounting
There are three main structures within invoice finance, and the difference is important.
The lender manages your credit control and chases payment from your customers on your behalf. Your customers will be aware that a finance company is involved. This can suit businesses that want to reduce the time spent chasing payments, or that do not have a dedicated credit control function.
You retain control of your own credit control. Your customers pay you directly as normal and the lender's involvement is confidential. This tends to suit more established businesses with their own credit control processes in place.
Not every business wants or suits a whole-ledger facility. Selective invoice finance allows you to choose specific invoices to finance rather than committing to a full ledger arrangement. This can work well for businesses that only occasionally need to release cash from invoices, or those with a small number of large customers.
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The right structure depends on how much control you want to keep, how often you need funding and how your business collects payment from customers.
Is this right for your situation?
Invoice Finance is likely to be relevant if:
Your business raises invoices to other businesses or organisations
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Payment terms are 30 days or longer and cash flow is under pressure as a result
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The business is growing and needs a facility that grows with it
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You want to reduce the time between completing work and receiving payment
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Invoice Finance may not be suitable if:
Your business sells directly to consumers rather than other businesses
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Your invoices are disputed frequently or have complex terms attached
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Your business is in an early stage with limited invoicing history
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You only need occasional access to invoice finance rather than a full facility - selective options may be worth considering instead