When customers pay on 30–90 day terms, strong sales can still leave you short of working capital. This problem–solution playbook shows how to use invoice finance practically-not just what it is-to smooth December/January peaks, fund growth, and protect day-to-day operations.
New to the concept? Learn the fundamentals on our pillar page: Invoice Finance.
Ready to compare structures? See Invoice Factoring and Invoice Discounting.
The cash-flow problem most UK SMEs share
Receivables stretch out (30–90+ days).
Costs are immediate (payroll, stock, logistics, energy).
Growth amplifies the gap (bigger orders = bigger outlay).
Invoice finance converts raised invoices into an on-demand cash line. But the real win comes from deploying it with a plan—tight processes, clean data, and the right structure for your ledger.
Turn invoices into a cash-flow line: the practical steps
Sync your invoicing (portal/API) so approved invoices hit the lender quickly.
Draw the agreed percentage shortly after invoices are raised.
Run collections your way (discounting) or outsource to the funder (factoring).
Receive the balance when payment clears, minus agreed fees.
Refine eligibility (customer limits, documentation) to raise usable headroom.
Prefer a simple lump sum for stock or refurb? Compare Business Loans and Same-Day Business Loans. Need a reusable line for short dips? See Revolving Credit Facility.
30/60/90-day cash-flow action plan (works with or without a facility)
Days 0–30: Stabilise & speed receipts
Fast-invoice discipline: invoice same-day with PO references and POD attached.
Prioritise biggest/earliest payers: friendly reminder cadence before month-end.
Start a trial draw: fund a subset of invoices to learn portal, cut-off times, and cash timing.
Supplier wins: share your cash-flow plan; negotiate early-pay discounts where viable.
Days 31–60: Build capacity to scale
Broaden eligibility: add more customers/invoices once the process is smooth.
Reduce dispute friction: standardise delivery notes, acceptance criteria, and credit notes.
Blend tools: pair invoice finance with a revolving credit buffer for tiny timing gaps.
Measure ROI: track reduced DSO, captured discounts, and fewer stock-outs.
Days 61–90: Optimise and lock gains
Tune limits & concentrations: request higher caps for reliable customers.
Seasonal prep: pre-approve key accounts before peak season.
Cost control: review utilisation patterns and fee drivers; trim avoidable charges (see FAQs).
Scale confidently: align hiring, stock, or projects to the stabilised cash cycle.
Clean-ledger checklist (raises usable headroom)
Accurate customer data: legal names, billing contacts, PO rules.
Consistent documentation: signed PODs / service confirmations tied to each invoice.
Low dispute rate: clear T&Cs, defined acceptance, written variation logs.
Concentration transparency: show top debtor exposures and mitigation.
Regular clean-down: timely allocation of receipts and tidy aged debt.
If you want outsourced collections and tight clean-downs, compare Invoice Factoring. If confidentiality matters and your team is strong, see Invoice Discounting.
Factoring vs discounting: choose the control you need
Invoice Factoring (disclosed): working capital plus funder-led collections. Great for lean teams and rapid scale.
Invoice Discounting (often confidential): working capital while you retain credit control—customer experience stays the same.
Both accelerate cash; the right choice depends on collections ownership and how you want customers handled day-to-day.
Measurable outcomes to expect
Faster cash conversion: funding near day one of invoicing.
Operational reliability: payroll, stock, and projects stay on schedule.
Supplier leverage: earlier payments can unlock better terms.
Growth readiness: cash capacity scales with sales, not just with overdraft limits.
Forecast clarity: predictable inflows improve hiring and purchasing decisions.
We do not publish definitive rates. Availability and terms depend on lender criteria, credit profile, debtor quality, and documentation.
Micro case snapshot (illustrative)
Recruitment agency, 25 staff (UK-wide contracts)
Problem: Weekly payroll vs. 30–45 day client terms caused high overdraft usage.
Solution: Confidential invoice discounting integrated with the accounts package; selected customers funded initially, then expanded.
Outcome (first 90 days): DSO proxy improved by ~20 days; payroll met without borrowing spikes; capacity to take a new framework without cash strain.
Illustrative only; structures depend on lender criteria.
When invoice finance isn’t the best fit (and what to use instead)
Few B2B invoices / very small ledger: a Business Loan or Revolving Credit Facility may be cleaner.
One-off, short project: Same-Day Business Loans can be faster where documents are ready.
You need equipment, not cash: spread costs with Asset Finance or release equity via Asset Refinance.
How The Funding Store helps
Large UK lender panel: mainstream and specialist providers in one place.
Most credit profiles considered: options for established firms and ambitious growers.
Dedicated account manager: one contact from enquiry to first draw.
Transparent process: straightforward documents, timelines, and next steps.
Start with our pillar guide: Invoice Finance
Then compare structures: Invoice Factoring · Invoice Discounting
FAQs: Advanced questions UK SMEs ask about invoice finance
- How do lenders calculate my usable limit (not just the headline)?
They apply advance rates to eligible invoices, then deduct ineligibles (aged debt, disputes, concentrations, contractual exclusions). Improving documentation and reducing disputes raises usable headroom. - Can I run discounting for most customers and factoring for a tricky segment?
Some lenders allow segmented approaches or selective facilities. Whether you can mix depends on documentation, systems, and notified vs. confidential flows. - How do I migrate from overdraft to invoice finance with minimal disruption?
Stage the transition: keep the overdraft while your facility goes live, fund a subset of invoices, redirect payments, then scale. A planned cut-over reduces reconciliation issues. - What accounting entries change with discounting vs factoring?
Both accelerate cash; presentation can differ (gross vs. netting, receivable derecognition policies). Your accountant will confirm treatment based on facility terms and materiality. - How can I reduce costs without switching provider?
Use the facility efficiently: upload promptly, clean disputes quickly, manage concentrations, and avoid unnecessary same-day payments. Higher data quality = lower risk = better terms over time. - What happens if a large customer pushes terms from 60 to 90 days?
Discuss tenor caps and concentration limits with the lender. You may adjust eligibility, increase caps for proven payers, or blend with a revolving credit buffer. - Can I fund export invoices?
Often yes, with export add-ons and jurisdiction checks. Expect extra verification and different eligibility rules by country. - Will customers be contacted if I use discounting?
Discounting is typically confidential. Payments route through a designated account, while your team handles collections; verification can still occur. - How fast can first funds arrive?
After onboarding and any audit, draws on approved invoices can be quick-often same day subject to cut-offs and bank processing. Preparation shortens the timeline. - Can I switch providers later?
Yes. Lenders can refinance/novate the facility, settle the existing line, and transfer ledgers with planned notices to minimise disruption.
Related pages
Invoice Finance — fundamentals and full comparison
Invoice Factoring — working capital plus outsourced collections
Invoice Discounting — confidential funding with in-house credit control
Ready to turn invoices into predictable cash flow?
Share your ledger profile, average terms, and key debtors. We’ll compare options across our panel, present clear choices, and keep everything moving to go-live.
We do not publish definitive rates. Availability and terms depend on lender criteria, credit profile, debtor quality, and documentation.
