Invoice trading

Wednesday 30th April 2025

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What is invoice trading?

Invoice trading is a form of short-term finance that allows businesses to raise money by selling individual invoices - or a batch of invoices - to external investors. This is typically done via an online trading platform.

Rather than waiting 30, 60 or 90 days to be paid by customers, businesses receive a cash advance (usually around 90% of the invoice value) from investors, who then receive the full payment when the customer settles the invoice.

Unlike traditional invoice factoring, where a finance provider manages your sales ledger and credit control, invoice trading puts more control in your hands. It’s often used by businesses that want flexible access to funding without tying themselves into longer-term agreements.

How does invoice trading work?

The invoice trading process is usually simple and handled through an online platform. Here’s a typical example of how it works:

Sign up and verify: Your business registers with an invoice trading platform and shares basic company and financial information.
Upload your invoices: You choose the invoice(s) you want to sell – this could be a single high-value invoice or a selection of smaller ones.
Invoice verification: The platform checks that the invoices are valid and that the debtor is a reliable payer.
Auction or instant match: Depending on the platform, your invoice is either matched instantly with investors or auctioned to bidders.
Receive an advance: Once an investor buys the invoice, you’ll receive a cash advance – usually up to 90% of the invoice value – within 24 to 48 hours.
Customer pays: When your customer pays the invoice, the investor receives the full amount. You receive the remaining balance, minus the agreed fees.

What are the benefits of invoice trading?

Invoice trading can be a useful tool for managing cash flow, especially for businesses that have long payment terms or deal with large clients. Benefits include:

Faster access to cash: No more waiting weeks or months to get paid - turn unpaid invoices into cash in days.
No need for assets: Unlike secured loans, invoice trading doesn’t require you to pledge property or equipment as collateral.
Control and flexibility: Choose which invoices to trade and when - you’re not locked into ongoing contracts.
Online convenience: Everything is managed through a digital platform, making it fast and accessible.

Things to consider before using invoice trading

While invoice trading offers flexibility, there are a few things businesses should weigh up before getting started:

Fees can vary: You’ll usually pay a percentage of the invoice amount (up to 5%) as a fee. Costs can rise if your customer delays payment.
You remain responsible: Unlike non-recourse factoring, the responsibility for unpaid invoices often remains with your business.
Customer experience: In some cases, the investor may contact your customer directly. This could affect your client relationships.
Not suitable for all: Invoice trading works best for B2B businesses with high-value invoices and creditworthy customers.

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Is invoice trading right for your business?

Invoice trading can be a helpful option for businesses that:

Operate in industries with long payment terms (e.g. manufacturing, recruitment, construction)
Have large customers that are slow to pay
Want short-term finance without taking out a loan or using assets as collateral
Prefer a selective, invoice-by-invoice approach to funding
If you’re looking for a simple way to boost cash flow, invoice trading could be worth exploring - particularly if you need flexibility or only want to finance a few invoices at a time.

How does invoice trading compare to other forms of invoice finance?

Feature	Invoice trading	Invoice factoring	Invoice discounting
Customer interaction	Sometimes contacted	Managed by provider	Remains with business
Advance rate	Up to 90%	Up to 90%	Up to 95%
Control	High	Shared	High
Flexibility	High (invoice-by-invoice)	Medium	Low (usually all invoices)
Commitment	No ongoing contract	Usually ongoing	Ongoing facility
Typical users	SMEs with large invoices	Growing businesses	Larger firms with in-house credit control