Cashflow challenges are on the rise. How can Invoice Finance help free up your cashflow?

According to a recent snapshot* of UK SMEs at the end of Q2 2025, 47% reported experiencing cashflow challenges.  In addition, 57% expect rising costs in the coming quarter, and 51% flagged financial or resource management as growth barriers.**

It’s a concerning picture and for many businesses, waiting 30, 60, or even 90 days for customers to pay their invoices can feel like a slow drip of funds into their cashflow pot. Bills, payroll, and supplier payments don’t wait—but your debtors often do which can put a hard stop on your plans.

That’s where Invoice Finance steps in.

Understanding Invoice Finance

Invoice finance is a funding solution that allows you to unlock cash tied up in unpaid invoices. Instead of waiting for your customers to pay, you can use those invoices as collateral to get an advance from an invoice finance company.

Many confuse this form of funding with loans.  It’s not a loan in the traditional sense—you’re essentially converting your outstanding debts into immediate cash. The funder advances a percentage of the invoice value upfront (often between 70–90%) and releases the remaining balance, minus fees, once your customer settles the invoice.

How It Works in Practice

1. You issue an invoice to your customer with agreed payment terms.
2. You submit that invoice to your funder
3. You receive an agreed advance—normally between 70-90% within 24 hours
4. Your customer pays the invoice payment directly to the funder
5. The remaining funds (minus service fees) are released to you.

This process keeps your cash flow moving, so you’re not stuck waiting for slow or late payments and you have available cashflow to put your plans in motion.

Types of Invoice Finance

• Factoring – The funder releases funds against your outstanding invoices and takes on the responsibility of collecting invoice payment from your customers
• Invoice Discounting – Similar to Factoring but you maintain control over your sales ledger and collections

Both solutions have their merits—the right choice depends on the size of your business and the resources you have available to undertake efficient and productive collections

The Benefits to your cash flow

• Improved cashflow – Access funds tied up in unpaid invoices as soon as they are raised
• Strengthened financial situation – you can cover payroll, rent, and supplier payments without stress and may be able to negotiate early payment discounts
• Growth opportunities – Funds available to invest in marketing, stock, or expansion without waiting for invoices to be paid
• Flexibility – Funding grows in line with your sales; the more you invoice, the more financing you can access
• Reduced reliance on traditional loans – No need to take on long-term debt just to bridge a short-term gap.

Is Invoice Finance Right for You?

Invoice finance can be especially useful if:

• Your business sells to other businesses (B2B) on credit terms
• You have reliable customers but long payment cycles
• You experience seasonal fluctuations in cash flow
• You need quick access to working capital to seize growth opportunities

In summary

Invoice financing can be a strategic tool to unlock funds you’ve already earned, without adding debt to your balance sheet. By turning unpaid invoices into working capital, you can keep your business running smoothly—and position yourself to take advantage of opportunities instead of waiting for payments to arrive.

**Accountancy Age

* Intuit QuickBooks’ Q2 2025 snapshot of UK SMEs:

Link to further reading

Why UK businesses should choose Invoice Finance.