Invoice Finance: Get Paid for Work You Have Already Done
Every time you raise an invoice and wait for it to be paid, you are lending money to your customer. Invoice finance is how you stop doing that — and start getting paid when the work is complete, not 30, 60 or 90 days later.
There are several ways to structure it. Pinks will tell you which one fits your business and why.
Plain English: Invoice finance lets you borrow against money that is already owed to you. You raise an invoice, a lender advances you most of the value, and you repay when your customer pays. It is not a loan against your property or assets — it is simply unlocking cash that is already yours.
What Is Invoice Finance?
Most businesses that operate on payment terms are effectively extending credit to their customers — and funding that credit out of their own reserves. Invoice finance reverses that arrangement.
You raise invoices as normal. A lender advances you a large proportion of each invoice’s value — typically 80 to 90%, sometimes higher — and holds the invoice as security. When your customer pays, the lender releases the remaining balance to you, minus their charges. The facility is ongoing: as new invoices are raised, the funding replenishes.
The result is a business that is no longer at the mercy of customer payment terms. You have the cash to pay wages, take on new work, and manage your operation without waiting.
Which Type of Invoice Finance Is Right for You?
There is no single invoice finance product. The right structure depends on how your business runs, whether you want to stay involved in collecting payments, and how much flexibility you need. Here is a plain summary of the three main options.
| Product | How It Works | Best Suited To |
|---|---|---|
| Invoice Discounting | You draw against your full book of outstanding invoices. The arrangement is confidential — your customers pay you directly and are unaware of the facility. | Businesses that want to retain full control of their customer relationships and credit control. |
| Invoice Factoring | The lender advances funds against your invoices and takes over the collection of payments from your customers on your behalf. | Businesses that want to outsource credit control or have limited resource to manage collections internally. |
| Selective Invoice Finance | You choose individual invoices to finance rather than your whole ledger. More flexible, but generally priced at a higher cost per invoice. | Businesses with occasional large invoices or those not ready to commit to a whole-ledger facility. |
Invoice Discounting
You pay in instalments over an agreed term and own the asset outright once the final payment is made. Hire purchase is the most straightforward form of asset finance — you are effectively buying the asset on credit, secured against the asset itself. It sits on your balance sheet as both an asset and a liability, and you can claim capital allowances.
Invoice Factoring
The lender buys the asset and leases it to you for an agreed term. You make monthly payments and have full use of the asset, but ownership stays with the lender. At the end of the term, you can typically extend the lease, return the asset, or arrange a sale (with the proceeds shared according to the agreement). Finance leases sit on your balance sheet and you can usually claim the lease payments against tax.
Selective Invoice Finance
Similar to a finance lease, but typically shorter in duration and kept off your balance sheet. The lender retains responsibility for the residual value of the asset at the end of the term. Operating leases work well for assets that depreciate quickly or need to be updated regularly — technology, vehicles, and specialist equipment often fall into this category. Monthly payments are usually lower than hire purchase because you are not financing the full value.
How Invoice Finance Works in Practice
Example: A staffing business supplying temporary workers to a local council
Workers are paid weekly. The council pays monthly in arrears. That gap — between wages going out and payment coming in — creates a cash flow problem that has nothing to do with how well the business is run. With an invoice finance facility in place, the business can draw up to 90% of each weekly invoice immediately, keeping payroll on time and operations running without relying on an overdraft or the directors’ own funds.
The same principle applies across most sectors: a building contractor waiting on a main contractor to pay a stage payment, a logistics company with net 60 terms, a manufacturer carrying large orders that will not settle for weeks. The business has done the work. The money is owed. Invoice finance makes it available now.
The Setup Process
- Pinks reviews your business — turnover, customers, payment terms, trading history — and identifies which lenders are likely to approve and at what advance rate
- We prepare and present your application to the right lender, correctly positioned from the outset
- On approval, the lender reviews your outstanding invoices and completes legal documentation. Setup typically takes one to three weeks
- Once live, you notify the lender when invoices are raised — often via an online portal or direct integration with your accounting software — and funds are available within 24 hours
- As customers pay, the facility replenishes. It runs continuously alongside your business
What Changes When Invoice Finance Is in Place
You Stop Subsidising Your Customers’ Payment Terms
Every business operating on net 30, 60 or 90 terms is effectively lending money to its customers interest-free. Invoice finance ends that arrangement. You access the cash when the work is done.
Cash Flow Becomes Predictable
When you know that funding will be available within 24 hours of raising an invoice, the entire way you manage the business changes. You can commit to new contracts, take on staff, and pay suppliers on time — without waiting to see what clears that week.
The Facility Grows With You
Invoice finance is not a fixed credit limit. The more you invoice, the more is available to draw. Businesses in a growth phase find this particularly valuable: as turnover increases, so does the funding, without the need to renegotiate or reapply.
It Usually Sits Outside Your Existing Bank Relationship
Invoice finance is secured against your outstanding invoices rather than your property or personal assets. In most cases it does not conflict with or erode existing bank facilities, which means you are adding to your available funding rather than replacing it.
You Choose How Involved the Lender Is
With invoice discounting, your customers never know the lender exists. With factoring, collections are handled for you. The product can be matched to how you want to run your business — not the other way around.
Is Invoice Finance Right for Your Business?
Invoice finance works for businesses that invoice other businesses on payment terms. If you do the work, raise an invoice, and then wait to be paid — there is likely an invoice finance product that fits.
It tends to work well when:
- You trade business-to-business and issue invoices with payment terms (30, 60 or 90 days)
- Your business has been trading for at least two years with filed accounts
- You have more than one customer — a spread of invoices is preferred over reliance on one client
- Your customers generally pay, even if they take their time
- You have a reasonable record of what is owed to you and when
It works across a wide range of sectors, including:
- Construction, contracting and building trades
- Recruitment and staffing agencies
- Haulage, logistics and distribution
- Manufacturing and wholesale
- Professional services — engineering, consultancy, accountancy
- Facilities management and maintenance
A Note on Lender Matching: Not every lender prices the same business the same way. A specialist invoice finance provider may offer significantly better terms than a high-street bank for the same ledger. Part of what Pinks does is match your specific profile — your sector, your customer mix, your advance rate requirements — to the lender most likely to approve and price it competitively. We do this before any application is submitted, to avoid declined applications that could affect your credit record.
Frequently Asked Questions
The key difference is who collects the money from your customers. With invoice discounting, you remain in charge of collecting payments — your customers pay you directly and are unaware of the lender. With invoice factoring, the lender takes over the collection process, and your customers are aware of the arrangement. Both products advance you cash against your invoices; the distinction is in the level of lender involvement and whether the arrangement is visible to your customers.