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HaslamConsultInvoice Finance

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.

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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

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.

How it works,
step by step

  1. 01

    You raise invoices as normal

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

  2. 02

    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.

  3. 03

    Your customer pays

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

  4. 04

    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 tends to suit

  • 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 requirements

  • 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

Potential 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 consider

Invoice finance is not right for every business. These are the points we talk through before anyone approaches a provider.

  • 01

    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.

  • 02

    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.

  • 03

    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.

Factoring or Discounting?
The Differences

The two main forms of invoice finance look similar on paper but suit different businesses. Here is how they compare on the points that matter most.

Who collects payment
FactoringThe provider's credit control team
DiscountingYour own team
Customer awareness
FactoringUsually disclosed
DiscountingOften confidential, subject to provider criteria
Control of customer relationships
FactoringShared with the provider
DiscountingRetained by your business
Demands on your systems
FactoringLower
DiscountingHigher: accurate ledger and reporting expected
Service fee
FactoringGenerally higher, reflecting the collections service
DiscountingGenerally lower
Often suits
FactoringSmaller or growing firms, lean back offices
DiscountingEstablished firms with strong processes
About factoring About invoice discounting

Invoice Finance questions

  • 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.

  • 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.

  • 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.

  • 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.

  • 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.

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