Invoice Finance for UK Businesses: Unlock Cash from Unpaid Invoices

Invoice finance helps businesses release cash tied up in unpaid invoices, improving cashflow without waiting 30, 60 or 90 days for customers to pay. Wise Commercial Finance Limited arranges invoice finance solutions for UK SMEs across a wide lender panel, including facilities designed for construction, transport, recruitment and service firms.

Quick Facts

What it is

Funding secured against unpaid invoices

Best for

improving cashflow, funding growth, smoothing payment delays

Typical structure

Set up fee + monthly service fee + discount (interest) fee for funds in use

Typical advance

often between 85–90% (depends on debtor quality and industry)

Speed

can be quick to receive funds, once facility is in place

Security required

Typically a PG for a percentage of the funding line and a debenture

Repayment type

the facility is repaid as invoices are paid

What is invoice finance?

Invoice finance is a business funding solution that allows companies to unlock cash from unpaid invoices. Instead of waiting for customers to pay on credit terms, an invoice finance provider advances a percentage of the invoice value upfront. Once the invoice is paid, the remaining balance is released (minus any agreed fees).

Invoice finance is commonly used by B2B businesses that operate on credit terms and need predictable cashflow to fund payroll, suppliers and fuel growth. It is often used by construction firms, haulage companies, recruitment agencies and service businesses where payment cycles can be long.

Two common types of invoice finance

Invoice factoring
The provider may manage credit control and collections (useful if you want support chasing payments).

Invoice discounting
You usually keep control of collections, and the facility may be confidential (useful if you want customers not to know you are using external finance).

What you’ll usually need

  • Aged creditor and debtor list (who owes you money and when)
  • Turnover and average invoice values
  • Last set of filed company accounts 
  • Basic business information and ID checks
  • Copies of invoices or contracts (in some cases)

Costs & pricing

Invoice finance costs vary depending on turnover, invoice volumes, debtor quality and whether you choose factoring or discounting. Costs typically include:

  • Service fee: often linked to turnover or facility size
  • Discount fee: an interest-like charge on funds advanced
  • Other costs depending on setup and provider (for example, trust account fees)

The exact fees depend on your business profile and how your customers pay. Wise Commercial Finance Limited will explain fees clearly and help you compare options on a like-for-like basis.

How invoice finance works

1

You issue invoices to customers as normal

2

The finance provider advances a percentage of invoice value

3

Your customer pays the invoice

4

The provider deducts fees and releases the remaining balance

Worked examples (estimates)

Example 1 — Funding one large invoice
A business issues a £20,000 invoice on 60-day terms and needs cashflow now. Invoice finance releases a percentage upfront to cover wages and supplier costs.

Example 2 — Ongoing facility for a growing business
A company invoices £150,000 per month and uses invoice finance to smooth cashflow, fund growth and reduce reliance on overdrafts.

Example 3 — Construction business with longer payment cycles
A subcontractor operating on extended payment terms uses invoice finance to stabilise cashflow while taking on larger contracts.

Eligibility

Invoice finance may be suitable for:

  • Businesses that trade B2B and invoice customers
  • Companies with regular invoicing and predictable debtor relationships
  • Firms with long payment terms that need cashflow support
  • Many sectors including construction, transport, recruitment, engineering and services

It may be less suitable for consumer-facing businesses or companies with very small or irregular invoice volumes, although options may still exist depending on circumstances.

Benefits and alternatives

Benefits

  • Releases cash from unpaid invoices
  • Funding line can grow as turnover increases
  • Can reduce reliance on overdrafts
  • Helps fund payroll, suppliers and growth
  • Factoring can include credit control support

Alternatives

  • Overdraft
  • Business loan
  • Asset refinance
  • Single invoice finance / spot factoring (Speak to us if you need to fund a one-off or occasional invoices)
  • Negotiating shorter payment terms

Frequently Asked Questions

What is the difference between invoice finance, factoring and invoice discounting?

Invoice finance is the umbrella term for funding secured against unpaid invoices. The two main types are:

  • Factoring: the provider may manage credit control and collections and customers are usually aware payments go to the factoring company.
  • Invoice discounting: you usually retain control of credit control and collections, and the arrangement can often be confidential.

The best option depends on whether you want credit control support and whether confidentiality matters to you.

How much can I release from an invoice?

Many providers advance a percentage of invoice value, often between 85–90%, depending on the quality of your customers, invoice size, payment history and sector. The remaining balance is typically released when the invoice is paid, minus any fees.

If your customers pay reliably and your invoicing is consistent, you may be able to access higher advances.

Will my customers know I’m using invoice finance?

It depends on the type of facility:

  • With factoring, customers usually pay the provider directly and are typically aware of the arrangement.
  • With invoice discounting, many facilities can be confidential, meaning customers continue paying you as normal.

We can help you choose a facility based on your preference and how your customers operate. There are many different options available, so we can usually find something that works for you.

How are invoice finance fees calculated?

Invoice finance costs usually include:

  • A service fee (often linked to turnover, facility size or admin support) This covers the lenders costs to maintain the facility for you.
  • A discount fee (interest-like cost on funds drawn down) This is interest charged on funds in use.
  • Sometimes setup, audit or minimum usage fees (depending on provider) We compare the options and run through them with you.

Pricing depends on your turnover, customer base, debtor quality, and whether credit control is included.

Is invoice finance suitable for construction businesses?

Yes! Invoice finance is commonly used in construction and related trades, especially where payment cycles are long. It can help subcontractors and construction firms manage cashflow while waiting for invoices to be paid.

Some providers specialise in construction invoice finance and understand the sector’s payment structures and contract formats. Typically, you do need at least one director to be a homeowner, but we do have options for well performing construction firms, even if you are not a homeowner.

Can new businesses use invoice finance?

Some providers will consider newer businesses, particularly if the business has strong customers, signed contracts and reliable invoicing. However, new businesses may face tighter criteria or slightly higher costs until trading history is established. If the debtors are of a good quality, you should be absolutely fine.

We can advise on the best options depending on your trading profile. This can save you an awful lot of time, approaching lenders that will take you through a long process, only to decline at the end. This is often due to inexperienced call centre staff taking your calls, we only deal with our dedicated broker relationship managers at each lender.

Do I need a minimum turnover to use invoice finance?

Some providers require a minimum turnover level, but there are many solutions available for smaller businesses depending on invoice volume and customer quality. We know which lenders will be best suited to a smaller turnover business.

Is invoice finance better than a business loan?

Invoice finance and business loans solve different problems. Invoice finance is ideal for improving cashflow tied up in invoices and can grow with your sales. A business loan may be better for one-off projects, investment or fixed repayment borrowing.

We can help you decide which product best fits your situation.

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