Article 12

What is Invoice Finance?

1) In a nutshell

Invoice finance is a collective term for the various types of invoice based lending such as invoice discounting, selective invoice discounting, invoice factoring and spot factoring.

This type of finance uses invoices as a way for businesses to speed up cash flow, or working capital, by unlocking cash tied up invoices. This is done by selling their invoices to a third party who will advance some of the funds the invoice is worth up front, for a cut of the invoice.


2) Also known as...

Receivables finance; Accounts receivables finance; Invoice factoring; Invoice discounting


3) How it works

  1. You provide the goods/services to your customer and invoice them
  2. You send the invoice details to the invoice finance provider
  3. A percentage of the face value of the invoice is paid to you, usually within 48 hours (different factoring companies will advance different percentages % depending on their own risk criteria)
  4. Depending on the type of invoice finance, either you carry out payment chasing as normal or the invoice finance provider will take control of this part of your client relationship for you
  5. When your debtor pays, the remainder of the invoice that you didn’t receive earlier is paid back to you – less a service fee
Diagram showing how invoice finance works

4) Advantages of invoice finance

The obvious advantage of invoice finance is being paid the majority of an invoice within 48 hours, instead of waiting 30+ days, thus helping businesses manage their cash flow.

Another significant advantage is that invoice finance gives businesses a way to fund their growth without taking on extra liabilities or debt, as with a business loan, and using assets they already have. See our page on invoice finance vs business loans here.


5) Things to consider

It’s important to look into the different types of invoice finance what suits your business. For example, you may have to put your whole ledger through the invoice finance provider but want to only finance a few invoices or customers. Or you may want to do whole ledger and access more money.

Another consideration is credit control. Some invoice finance providers will insist on managing credit control themselves which could damage your customer relationships.

As mentioned, these things are specific to the types of invoice finance so make sure you know which one it is that you want and what each offer.


6) How MarketInvoice can help

Our invoice discounting solutions allow you to get an advance against your outstanding customer invoices – either on a selective or whole ledger basis. If you choose to add on credit control, you can get the benefits of credit collection support on a fully confidential basis.

It’s quick and easy to access funds, which means you can get the cash flow you need to get on with business. With MarketInvoice, you get:

  • Fast funding: apply online in 15 minutes and get a response within 24 hours
  • Hassle free experience: easy to use digital interface
  • Help in real-time: personal customer support
  • Straightforward costs: no hidden fees

7) Next steps

Also see… receivables finance, selective invoice discounting, factoring vs invoice discounting, factoring, invoice discounting, spot factoring, how to compare factoring companies


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