Invoice finance.

How invoice finance works

Invoice finance can release a proportion of an eligible invoice’s value before your customer pays. When the invoice is settled, the remaining balance is released after the provider’s charges, subject to the agreement.

The facility may cover individual invoices or a broader sales ledger. The provider assesses your business, customers and invoices.

Factoring and discounting

With factoring, the provider typically also handles collection of the invoices covered by the agreement. With invoice discounting, the business generally keeps responsibility for collecting customer payments.

Confidentiality, control and collection arrangements vary. Ask exactly what customers will be told and who will communicate with them.

Understand recourse and charges

A recourse agreement can require you to repay the advance if a customer does not pay. Any protection against non-payment has conditions and exclusions. Do not assume that invoice finance transfers all customer credit risk.

Compare service fees, discount charges, minimum fees, setup and exit fees, and any minimum contract term.

Check the fit with your cash cycle

Invoice finance depends on eligible invoices and can grow or shrink with sales. Disputes, concentration in a single customer or slow payment can affect availability.

Compare it with improving credit control, changing customer payment terms or using another suitable working capital route. It is useful to understand why the cash gap arises, not only how to bridge it.

A few common questions