Invoice finance is a financial tool that allows businesses to unlock the value of their outstanding invoices before customers have actually paid them. Essentially, it involves selling your unpaid invoices to a finance company or lender, who then advances you a significant portion of the invoice amount upfront—this can range from about 70% to 90% of the total value. When your customer eventually pays the invoice, you receive the remaining balance, minus the finance company’s fees for the service.

This method boosts your cash flow by providing immediate access to funds that would otherwise be tied up in the accounts receivable process for days or even months. It’s particularly useful for businesses looking to manage their cash flow more effectively, invest in growth opportunities, or cover operational expenses without waiting for customers to pay their bills. There are different types of invoice finance, including factoring, invoice discounting, and selective invoice finance, each with its own set of features tailored to various business needs and preferences.