An accountant told their client last month to avoid invoice finance. The business was growing, winning new contracts, but struggling to pay wages and materials before invoices were settled. Classic cash flow gap. The accountant’s view was that invoice finance was expensive and carried a stigma – lender of last resort stuff.
They were wrong on both counts, but I understood where it came from.
Invoice finance had a reputation problem in the eighties and nineties. Businesses used it when they were desperate, often too late. That perception stuck, particularly with advisors who haven’t kept up with how the market’s changed. The cost objection comes from the same place – comparing the percentage rate to an overdraft without considering what you’re actually paying for.
Here’s what changed their mind: we showed them examples of businesses we’d helped into invoice finance facilities, and more importantly, out of them. Because that’s the bit people miss. Invoice finance isn’t a trap. It’s a tool for scaling when your payment terms don’t match your cost base.
If you’re growing and your customers pay in 30, 60, or 90 days, you’ve still got payroll this month. You’ve still got suppliers expecting payment. You can turn down the work, stretch the overdraft, or release the cash that’s already tied up in unpaid invoices. Most growing businesses are carrying five or six figures in outstanding invoices at any point. Invoice finance lets you access that cash now – typically up to 85% or 90% of the invoice value within 24 hours of raising it.
The cost depends on the facility size and your turnover, but it’s usually between 0.5% and 2.5% of the invoice value. Yes, that’s more than overdraft interest. But an overdraft doesn’t grow with your sales. Invoice finance does. The more you invoice, the more funding becomes available. That’s the difference between a fixed limit that constrains growth and a facility that scales with it.
We’ve worked with businesses using invoice finance to fund expansion, take on bigger contracts, and shorten their cash conversion cycle. Once they’re through the growth phase and cash flow stabilises, they often move away from it. That’s fine. It did the job.
The stigma exists because people remember the version from 30 years ago. The accountant we spoke to last month now recommends it when the situation fits. Not because we sold them on it – because they saw businesses using it successfully and coming out the other side stronger.
If you’re winning work but struggling to fund it before payment arrives, it’s worth a proper conversation. Not every business needs invoice finance, but dismissing it based on outdated perceptions means you’re ruling out one of the few funding options that actually grows with you.
We’ll tell you whether it’s appropriate or not. Sometimes it isn’t. But that’s a better answer than avoiding it because someone told you it was only for businesses in trouble.
Frequently Asked Questions
Q: How quickly can I access funds through invoice finance?
A: Typically within 24 hours of raising an invoice, you can access up to 85-90% of its value. Once the facility is set up, it’s fast – which matters when you’re trying to cover wages and materials before your customer pays in 60 days.
Q: Is invoice finance only for businesses in financial trouble?
A: No – that’s an outdated perception from the eighties and nineties. Most businesses using invoice finance now are growing and need funding that scales with their sales. We’ve helped businesses into facilities during growth phases and out of them once cash flow stabilises. It’s a tool, not a life raft.
Q: How does invoice finance compare to extending my overdraft?
A: An overdraft has a fixed limit that doesn’t grow with your sales. Invoice finance releases funding based on your invoicing – the more you invoice, the more funding becomes available. Yes, it costs more percentage-wise, but you’re paying for funding that scales rather than hitting a ceiling just when you need capacity most.
Q: What does invoice finance typically cost?
A: Usually between 0.5% and 2.5% of invoice value, depending on your facility size and turnover. The cost reflects the fact that funding grows automatically with your sales rather than requiring you to reapply or renegotiate limits every time you win new work.
Q: Can I move away from invoice finance once I no longer need it?
A: Yes – and we’ve helped businesses do exactly that. Invoice finance works well during growth phases when cash flow is stretched. Once you’re through that period and cash flow stabilises, many businesses move to different funding structures. It’s meant to be a growth tool, not a permanent arrangement.
About Andy Bissett
Andy Bissett is founder of Shadowfax Funding Solutions, with over 20 years’ experience in commercial banking and specialist invoice finance at RBS, Yorkshire Bank, and Aldermore. He’s spent enough time watching businesses scale – and struggle – to know the difference between funding that helps and advice that holds you back. If you’re growing faster than your cash flow can support, or you’re curious whether invoice finance fits your situation, let’s talk.