Updated May 2026 · 9 min read
You delivered the work. You sent the invoice. Now you wait 60 days for payment while your rent is due next week. Invoice finance solves this — but it comes at a cost. Here's what small business owners need to know.
The average small business invoice is paid 45 days late (Xero research). That means a Net 30 invoice isn't paid until day 75. If you have staff, suppliers, or rent to pay in the meantime, you have a cash flow gap.
Invoice finance bridges this gap by advancing you most of the invoice value now, in exchange for a fee.
You sell your invoices to a factor at a discount. The factor collects payment directly from your client. You receive ~80% upfront and the balance (minus fees) when the client pays.
Pros
✅ Fast cash — usually within 24–48 hours
✅ Factor handles collections
Cons
❌ Your client knows you're using a factor
❌ Factor chases your client (can damage relationships)
Best for: Businesses comfortable with third-party collection
Similar to factoring, but you retain control of your sales ledger and continue to collect payment yourself. The lender advances you funds against your invoices, which you repay when the client pays.
Pros
✅ Confidential — client doesn't know
✅ You keep control of client relationship
Cons
❌ You still chase payments yourself
❌ Usually requires larger invoice volumes
Best for: Established businesses with strong credit control
Choose individual invoices to finance, rather than committing your entire ledger. More flexible than traditional factoring.
Pros
✅ No long-term commitment
✅ Use only when you need it
Cons
❌ Higher per-invoice fees
❌ Not all providers offer it
Best for: Small businesses with occasional large invoices
Modern fintech platforms like Kriya, iwoca, and Bibby Digital offer fast digital applications, sometimes with same-day decisions.
Pros
✅ Fast online application
✅ Flexible amounts
✅ No long-term contracts
Cons
❌ Newer, less track record
❌ May have higher rates for smaller invoices
Best for: Tech-savvy businesses wanting a fast, flexible option
Invoice finance is not free money — it's a loan against your invoices, with fees:
| Fee | Typical Range | What it covers |
|---|---|---|
| Service charge | 0.5–3% | Admin, credit checks, account management |
| Discount charge | 1–3% per 30 days | The 'interest' on the advance |
| Minimum monthly fee | Varies | If you don't meet minimum volumes |
| Early repayment | Sometimes | If you pay back early (less common) |
One of the UK's largest independent invoice finance providers. Strong for SMEs.
Bank-backed invoice finance with competitive rates for established SMEs.
Fintech platform, fast digital application, selective invoice financing.
Fast SME lender — invoice finance and business loans, known for quick decisions.
Part of Skipton Building Society. Good for businesses with steady invoice volumes.
Before paying 2–6% in finance fees, try reducing the time between invoice and payment. Automated payment reminders can cut your average days-to-payment by 30–50%. That's free cash flow improvement — no fees, no credit checks.
Try Chaser Free — Cut Your Payment Cycle →Invoice finance allows small businesses to unlock cash tied up in unpaid invoices. Instead of waiting 30–90 days for clients to pay, you receive most of the invoice value upfront from a lender.
Typical cost is 2–6% of invoice value, comprising a service charge (0.5–3%) and a discount charge (1–3% per 30 days).
Invoice factoring works best for B2B businesses with established customers and invoices over £5,000. Not suitable for consumer invoices or very small invoice values.
With factoring, the finance company chases your clients — your client knows about it. With discounting, you continue chasing clients yourself and it's confidential.
Chaser's automated reminders get invoices paid weeks earlier. No fees per invoice. Just faster payment.
Try Chaser Free