What is invoice finance?
A clear guide to invoice finance, how it works and how UK B2B businesses can use unpaid invoices to support cashflow and growth.
Invoice finance explained simply
Invoice finance is a way for a business to access funding against unpaid customer invoices, rather than waiting for customers to pay on their normal payment terms.
When a business sells to other businesses on credit terms, cash can be tied up in unpaid invoices for 30, 60, 90 days or longer.
Invoice finance can help by releasing a percentage of the invoice value earlier. This can improve cashflow, support working capital and reduce the pressure created by long payment terms.
The right facility depends on how your business invoices, how you manage customers, whether confidentiality matters and whether you need support with collections.
Simple summary: invoice finance turns unpaid B2B invoices into working capital before the customer has paid.
The typical invoice finance process
The exact process depends on the facility type and provider, but invoice finance usually follows a simple pattern.
You raise invoices
Your business supplies goods or services and raises invoices to B2B customers.
Funding is advanced
A percentage of eligible invoice value can be released before the customer pays.
Customer pays
The customer pays the invoice according to the agreed terms and facility structure.
Balance is settled
The remaining balance is reconciled after fees, charges and any agreed deductions.
What are the main types of invoice finance?
Invoice finance is not one single product. The right option depends on whether your business wants collections support, confidentiality, flexibility or a full sales ledger facility.
Invoice Factoring
Can release cash from unpaid invoices and often includes support with collections and debtor management.
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Invoice Discounting
Can release funding while your business usually keeps control of collections and customer relationships.
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Spot Factoring
Can support one-off or selective funding needs by focusing on specific invoices.
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Selective Invoice Finance
Can provide flexibility where a business wants to fund selected invoices or customer accounts.
Explore selective financeThe right facility depends on how your business wants to manage customers and cashflow.
Invoice finance may suit businesses that need:
- ✓ Working capital tied up in unpaid B2B invoices
- ✓ Support managing long customer payment terms
- ✓ Funding for growth, contracts or expansion
- ✓ A facility linked to sales and invoice values
It may be less suitable where:
- ✓ The business does not sell to other businesses
- ✓ Invoices are low value or highly disputed
- ✓ Customers do not have clear payment terms
- ✓ Another funding structure may be more appropriate
Invoice finance questions
Common questions from UK B2B businesses learning about invoice finance.
What is invoice finance?
Invoice finance is a funding facility that can release cash against unpaid customer invoices, helping businesses access working capital before customers pay.
How does invoice finance help cashflow?
It can reduce the delay between raising an invoice and receiving payment, which may help with payroll, suppliers, growth, stock, overheads or project costs.
Is invoice finance only for large businesses?
No, but Invoice Advance focuses on established UK B2B Limited Companies and PLCs, typically with turnover from £1m to £250m.
Is invoice finance confidential?
Some facilities can be confidential, especially invoice discounting structures. Suitability depends on your systems, debtor book, credit control and funder criteria.
What is the difference between factoring and discounting?
Factoring often includes collections and debtor management support. Discounting usually lets your business keep more control over collections and customer relationships.
Explore invoice finance options
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