Invoice Finance Explained, How to Stop Waiting 60 Days to Get Paid

You have done the work and sent the invoice. Now you wait. Invoice finance ends the wait. Here is how it works, what it costs, and who it suits.

What Is Invoice Finance?

You have done the work. You have sent the invoice. Now you wait. For many UK businesses, that wait is 30, 60, or even 90 days. Invoice finance ends the wait.

Invoice finance is a funding facility that advances a percentage of your outstanding invoice value, usually 85 to 90 per cent, within 24 hours of the invoice being raised. When your customer pays the invoice, the remaining balance is released minus the lender fee.

It is not a loan in the traditional sense. It is cash flow acceleration, releasing money you have already earned but not yet received.

Invoice Factoring Versus Invoice Discounting

These are two versions of the same product. The mechanics are identical. The difference is visibility.

Factoring: the lender manages your sales ledger and chases payment from your customers. Your customers know a lender is involved. This suits businesses without a dedicated credit control function.

Discounting: confidential. You manage your own sales ledger and collect payments yourself. Your customers have no idea a facility is in place. Larger, established businesses usually prefer discounting for this reason.

Who It Works For

Invoice finance works for any B2B business that invoices other businesses on credit terms. It works especially well in construction, recruitment, manufacturing, transport, and professional services.

It does not work for B2C businesses or businesses that take payment at the point of sale. The facility requires invoices raised to other businesses with standard credit terms of 14 to 90 days.

Real Example

A Sheffield construction company invoices a main contractor for £180,000 with 60-day payment terms.

Without invoice finance: wait 60 days for the cash. Pay subcontractors, materials, and wages from reserves. Hope nothing else comes due in the meantime.

With invoice finance: receive £153,000 (85 per cent) within 24 hours. Pay subcontractors and materials immediately. When the main contractor pays after 60 days, receive the remaining £27,000 minus the facility fee.

What Does It Cost?

Two fees apply. A service charge, typically 0.5 to 2.5 per cent of turnover, covers the administration of the facility. A discount charge on the advanced funds works similarly to interest and is charged on the amount drawn.

The exact cost depends on your turnover, sector, debtor profile, and the number of invoices processed. A broker can compare options across the full market to find the most competitive facility for your business.

How to Set Up an Invoice Finance Facility

Most facilities take 2 to 4 weeks to arrange from initial application to first drawdown. You need 3 to 6 months of bank statements, an aged debtors ledger showing current outstanding invoices, and basic company and director information.

Once set up, drawing funds against new invoices typically takes 24 hours. The facility grows with your business. As your turnover increases, the amount available to draw increases automatically.

Ready to stop waiting 60 days to get paid? Apply now or talk to a broker.