How invoice finance works in practice
Invoice finance moves some cash forward from an eligible sale. Follow what happens to the invoice, the advance and the later customer payment—and why the amount available can change.
From completed sale to reconciled payment
Create a valid receivable
Complete the relevant supply and bill under the customer agreement. Keep evidence of delivery or acceptance; an order for future work is not automatically a fundable debt.
- Standard invoice format
Check what can be drawn
The provider applies its eligibility rules, advance percentage and limits. Reserves or excluded debts can make usable cash lower than the total invoice value suggests.
- Cleared within 24 hours
Collect through the agreed route
The customer pays using the facility’s instructions. Factoring generally adds provider-led collection; discounting normally leaves follow-up with your staff.
- Standard 30–90 credit term
Reconcile the remaining amount
Receipts clear against funds advanced. Charges, credits and adjustments determine what remains to release, while fresh eligible invoices may support new drawings.
- Balance released immediately
Explore how the advance and balance change
Use the controls to vary invoice value, assumed advance and payment timing. The calculation is an illustration with fixed fee assumptions, not a provider quote or eligibility check.
YOUR ILLUSTRATIVE CALCULATION
How this example is calculated
This example applies a fixed 0.75% fee to the invoice and a hypothetical 7% yearly funding charge to the advance for the selected number of days, using a 365-day year. It assumes full invoice eligibility and deducts both charges from the later balance. It omits reserves, limits and additional costs. These assumptions are not offered rates: a provider’s assessment and agreement determine actual availability, pricing and payment dates.
Explain the debt as well as the business
A provider needs to see who owes the money, why it is payable and how your company manages its accounts. Prepare relevant records when requested; the first enquiry can start with a simple outline.
Records commonly discussed
• Debtor ageing showing current and overdue balances
• Customer contracts and example invoices
• Evidence of delivery, approval or completed work
• Recent accounts and cash-flow information
• Existing facilities and security commitments
• Identity information through the provider’s secure process when required
The operational choice: factoring or discounting
The cash sequence is only part of the decision. Compare who follows up payment, maintains the records and deals with customers day to day.
| Feature | Invoice factoring | Invoice discounting |
|---|---|---|
| Everyday follow-up | Provider-led chasing under the service agreement | Your accounts team remains responsible |
| Payment instructions | Customer receives the agreed provider payment details | Follow the account arrangements specified by the funder |
| Queries and disputes | Your business helps the provider resolve them | Your staff handle them and update the provider |
| Records required | Keep sales evidence, credits and balances accurate | Maintain timely reconciliation and debtor reporting |
| What to price | Funding plus the collection service and extras | Funding plus your internal administration cost |
Why one invoice may qualify and another may not
A provider assesses both your company and the debts supporting the request. A creditworthy customer does not resolve a disputed delivery, and a high invoice total does not override an agreed limit.
The business assessment
Accounts, trading background and existing commitments help the provider assess the applicant.
The customer debt
There must be a receivable of a type the facility accepts, generally arising from credit sales to organisations.
Limits and concentration
A large exposure to one debtor can restrict drawings even where the overall facility has spare capacity.
Evidence of entitlement
Orders, delivery records and approvals help establish what the customer owes and whether conditions remain outstanding.
Discuss your own invoice-to-cash cycle
Tell Positive Funding when you bill, how clients approve invoices and when your business needs the money. We can explore the gap using those dates and balances.