We provide lender-ready capital raise packaging and debt or equity placement support for business owners and buyers looking to secure serious term sheets and close funding on a defined timeline.
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Invoice financing and invoice discounting let businesses unlock cash from unpaid invoices without waiting 30, 60, or 90 days for customers to pay. If your revenue is real but cash flow is uneven, a receivables facility can resolve the mismatch directly. To explore arrangement support, see our invoice finance arrangement page.
Invoice financing is a broad term for facilities that advance cash against the value of outstanding invoices. Rather than waiting for customers to pay, a business sells or pledges those receivables to a financier and receives a percentage of the invoice value upfront, typically between 70% and 90%. The balance, minus fees, is released once the customer pays.
The term covers several distinct structures, the most common of which are invoice discounting and invoice factoring. Understanding the difference is important before selecting a facility, because the two operate differently in terms of credit control, confidentiality, and cost.
Key point: Invoice financing is asset-based. The lender's primary concern is the quality of your receivables and the creditworthiness of your customers, not your own credit history or profitability track record. This makes it accessible to businesses that might not qualify for traditional lending.
Invoice discounting is the most widely used form of invoice finance for established businesses. The business raises invoices with its customers as normal, then notifies the financier of eligible invoices. The financier advances a pre-agreed percentage of the invoice face value, usually within 24 to 48 hours. The business continues to manage its own credit control and customer relationships. When the customer pays, the funds are swept into a controlled account, and the financier releases the retained balance minus the discount fee.
Your business delivers goods or services and issues an invoice to the customer on standard payment terms, typically 30 to 90 days.
You upload or assign the invoice to the invoice discounting facility. The financier verifies eligibility against the borrowing base criteria.
The financier advances up to 90% of the invoice value, typically within 24 to 48 hours, directly into your operating account.
Your customer pays the invoice on the agreed terms. Funds are received into a controlled bank account under the facility arrangement.
The financier releases the retained balance, typically 10%, minus the agreed discount fee and any service charges.
Invoice finance facilities involve two primary cost components: a service fee and a discount charge. The service fee covers ledger management, administration, and credit checks. The discount charge is the interest equivalent, calculated on the daily balance of funds drawn down against the facility.
| Cost Component | Typical Range | How It Is Applied |
|---|---|---|
| Service fee | 0.2% to 3% of turnover | Charged on total invoice value assigned to the facility, regardless of funds drawn. |
| Discount charge | Base rate + 1.5% to 4% | Daily interest on the outstanding advance balance, similar to an overdraft. |
| Arrangement fee | 0.5% to 2% of facility limit | One-off setup fee payable on facility establishment, sometimes waived. |
| Bad debt protection | 0.3% to 0.8% of turnover | Optional non-recourse cover; protects against customer insolvency. |
| Minimum fee | Varies by lender | A floor on annual charges regardless of usage, common in smaller facilities. |
Total cost in practice: An all-in cost of 2% to 5% of the invoice value per 30-day period is a reasonable working estimate for most facilities. The precise rate depends on your turnover, debtor quality, concentration, and the specific lender's risk appetite.
Invoice finance for small businesses, sometimes called AR discounting or debtor finance, operates on the same principles as larger facilities but is often structured around a single invoice or selective pools rather than the whole ledger. This selective approach gives smaller businesses access to invoice financing without committing the entire accounts receivable book.
Key considerations for smaller businesses include minimum invoice values, minimum facility sizes, and whether the lender will advance against a concentrated debtor base. Lenders typically decline or significantly haircut facilities where a single customer represents more than 25% to 30% of the total receivables book.
Invoice finance is primarily available for B2B invoicing. Consumer receivables, progress billing, and invoices subject to retention are typically ineligible or heavily discounted by lenders.
The invoice must represent a completed transaction. Advance billing, deposits, and invoices issued before delivery are generally excluded from eligible receivables calculations.
Lenders assess the creditworthiness of your customers, not just your own business. Strong, diversified debtors with clean payment histories attract higher advance rates and lower fees.
Invoices subject to disputes, cross-claims, offsets, or extended retention terms are typically excluded. Lenders review dilution rates as a key eligibility and pricing input.
Invoice financing can be structured on a recourse or non-recourse basis. Under a recourse facility, if your customer fails to pay, the financier will seek repayment from you. Under a non-recourse facility, the financier absorbs the credit loss if the customer becomes insolvent, in effect providing bad debt protection alongside the funding. Non-recourse facilities carry a higher fee to reflect this additional risk transfer.
Practical note: Non-recourse protection typically covers insolvency events only, not slow payment, disputes, or contractual disagreements. Review the exact trigger events in any bad debt protection schedule before relying on non-recourse cover as a substitute for credit insurance.
The invoice financing market includes clearing banks, specialist independent funders, and fintech platforms. Each has distinct risk appetites, pricing models, and service levels. Banks tend to offer lower rates but apply more rigid eligibility criteria. Independent funders and platforms often accept more complex or concentrated ledgers at a premium price. To compare your options with a structured approach, see our asset-based lending arrangement and underwriting service.
Invoice financing is a facility that advances cash against the value of unpaid business invoices, allowing you to access working capital before your customers pay, typically at 70% to 90% of the invoice face value.
Invoice financing is the broad category. Invoice discounting is a specific structure within it where you retain control of your own credit function and the facility remains confidential from your customers.
AR discounting, or accounts receivable discounting, is another term for invoice discounting. It refers to the practice of borrowing against the discounted value of outstanding receivables on your sales ledger.
Small businesses can access invoice discounting through selective or spot facilities that advance against individual invoices rather than the whole ledger, reducing minimum size requirements and commitment obligations.
Debtor finance is the Australian and some Commonwealth market term for invoice finance. It operates on the same principles: advancing cash against the value of trade receivables owed by your customers.
Under recourse invoice finance, you repay the advance if your customer fails to pay. Under non-recourse, the financier absorbs the loss if the customer becomes insolvent, effectively providing bad debt protection as part of the facility.
A business invoice financing facility is a revolving credit arrangement linked to your outstanding invoices. As you raise new invoices and customers pay old ones, availability automatically adjusts within the agreed borrowing base.
Most invoice financing facilities can be set up in two to four weeks from initial application, assuming documentation is complete and the debtor book passes eligibility checks. Emergency or single-invoice structures can be faster.
Invoice discounting is confidential and has no impact on customer relationships. Invoice factoring is disclosed, meaning customers pay the factor directly, which some businesses prefer to avoid for relationship management reasons.
An invoice finance facility for small businesses is a receivables funding line sized to smaller ledgers, often with lower minimum turnover thresholds and more flexible eligibility criteria than standard whole-ledger facilities.
Expect a service fee of 0.2% to 3% of assigned turnover, a discount charge equivalent to base rate plus 1.5% to 4%, and potentially an arrangement fee. All-in costs typically range from 2% to 5% per 30-day period depending on facility size and debtor quality.
Financely works with businesses to structure, package, and arrange invoice finance facilities on a best-efforts basis. We review your debtor book, assess lender fit, and manage the process through to term sheet and closing.
Disclaimer: This page is informational and does not constitute legal, financial, or investment advice. Financely does not guarantee financing outcomes or approvals. Any engagement is best-efforts and subject to diligence, KYC and AML compliance, sanctions screening, and lender credit decisioning.
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