Invoice finance

What is invoice finance?

Invoice finance unlocks cash tied up in unpaid invoices by advancing a percentage of their value up front, often within 24 hours. Instead of relying on business overdrafts or cash flow loans, funding is linked directly to the invoices you raise, so access to cash grows in line with your sales.

This gives you immediate access to working capital, without waiting 30, 60 or 90 days for customers to pay.

Unlike traditional borrowing, invoice finance is secured against your customer invoices rather than your business assets. This makes it particularly suitable for growing, service-led or asset-light businesses that need working capital without increasing long-term debt.

For example, if you raise a £50,000 invoice and receive a 90% advance, £45,000 could be available within 24 hours. Once your customer pays, you receive the remaining balance, minus the agreed service and finance charges.

Many businesses combine invoice insurance with invoice finance to unlock cash while protecting against non-payment.

Pairing with a revolving line of credit is useful as invoice finance releases cash tied up in your receivables, a revolving credit facility covers short-term gaps between customer payments.

The two main types of invoice finance

• Invoice factoring: we advance up to 90% of each invoice, and our credit control team collects payment from your customers. It suits smaller or growing businesses that want to hand over chasing payments

• Invoice discounting: you borrow against your whole sales ledger and keep collecting payments yourself. It's usually confidential, and suits established businesses with their own credit control, typically turning over £500,000 or more

If you only want to fund some of your invoices, selective invoice finance or spot factoring let you choose which ones to release cash against.

The advantages of invoice finance

• Faster cash flow: receive up to 90% of an invoice's value within 24 hours, instead of waiting 30, 60 or 90 days for customers to pay

• Funding that grows with you: your facility is linked to your sales ledger, so the funding available rises as you invoice more, without reapplying

• No property security: your invoices act as the security, which suits service-led and asset-light businesses

• Choose your level of support: hand over collections with factoring, backed by our credit control team, or keep them in-house and confidential with invoice discounting

How much does invoice finance cost?

• A service fee: a percentage of your annual turnover for running the facility. This is typically 0.75% to 2.5% for invoice factoring, which includes credit control, and 0.2% to 0.5% for invoice discounting

• A discount fee: charged only on the money you draw, similar to interest. It's usually 1.5% to 3% above the Bank of England base rate.

Example below:

Invoice finance for new businesses

Starting a new business means cash flow pressure arrives before your reputation does - Invoice finance is one of the best funding options available from the point you begin trading as eligibility is based on your customers' ability to pay, not your own trading history or credit record.

The benefits of this are:

• No trading history required: Eligibility is based on your customers' creditworthiness, not yours

• Fund invoices from day one: Access working capital as soon as you start invoicing other businesses

• No fixed assets needed: Your invoices act as the security, not property or equipment

• Scales with you: As your invoice volume grows, so does the funding available to you

Things to consider with invoice finance

• Fees reduce the margin on each invoice, so weigh the cost against the value of faster cash flow

• It works best when you invoice a spread of creditworthy business customers. If most of your sales go to one or two clients, talk to us about alternatives

• Most facilities are ongoing arrangements with a notice period, rather than a one-off loan

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