Invoice financing: send a prepaid invoice

  • Alicia Heeger
  • The basis
  • 20 August 2020
  • Edited 23 January 2026
  • 1 min
  • Managing and growing
  • Finance

With invoice financing, you arrange quick payment of your outstanding invoices. These are bills that your customers have yet to pay. With invoice finance, a finance company pays these bills before your customers do. So you get your money right away. Like factoring, invoice finance is a form of pre-financing. It just works slightly differently. Read here how it works.

What is invoice financing?

Invoice financing involves selling an invoice to a financing company. You are personally responsible for ensuring that these invoices are paid by your customers. They will not see that the invoice has been prepaid by a financier and that you have entered into a loan, and you will remain the initial point of contact for your business associates. This is different from factoring. With factoring, your customers can see that a financier is involved.

The prepayment will ensure that your business will have access to your working capital quickly. This allows you to meet your short-term payment obligations yourself. For example, pay suppliers, pay salaries, carry out maintenance and re-stock. As soon as your customers transfer the payment for the invoice, you repay the lender.

How much will it cost you?

The fees payable for invoice financing vary depending on the business.

An example: the financing company transfers 90% of the invoice amount to your account. Once the funding term has passed, you will repay the financier 100%. The financier deposits the withheld 10% (less costs and interest) back into your bank account.

Is invoice financing right for your business?

If you supply products or services to the business market, you often sell on account. Since this means you do not receive any direct payments, this could potentially cause problems for your business’ cash flow. However, as you do need these funds to keep your business running, invoice financing might be a good option for you.

What do invoice financiers look for?

Invoice finance providers look at your sector, funding amount, and your company's annual figures. And also, for example, your business history, your customers, the average invoice amount, and the number of monthly invoices. With up-to-date records, you can provide these details quickly.

Tips for invoice financing

  1. Invoice financing is not based on a minimum monthly limit. You use this financing type at a time that best suits you. This gives you flexibility.
  2. Research about the opportunities, and the terms and conditions offered by providers of invoice financing.
  3. An alternative to invoice financing is a short-term business loan (an overdraft). You pay interest on the money you withdraw. 

Help with financing for your business

Do you want to know more about your financing options? Use the information in the Financing Guide. Getting help increases your chances of finding funding. With the right adviser and a good financial case, you stand a better chance of a positive result for your application. These advisers can help you. Do you have questions about financing and money matters? Contact the KVK Adviceteam.

Video: Financing your business

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