Published: 04/07/2026
Last updated: 04/07/2026
You've shipped the goods and sent the invoice. Now you wait – 30, 60, sometimes 90 days – for the customer to pay. In the meantime, the next supplier order needs funding, payroll is due, and a retail partner just asked if you can double the next shipment.
That gap between issuing an invoice and receiving payment is one of the most common cash flow constraints facing product businesses at scale. Invoice financing exists specifically to close it – without taking on debt in the traditional sense, without giving up equity, and without waiting for your customer's payment terms to run their course.
This article covers how invoice financing works, the difference between the main forms, what it costs, and how to assess whether it fits your business.
💡 Key takeaways
Invoice financing lets product businesses unlock cash tied up in unpaid customer invoices – typically up to 90% of the invoice value, within 24 hours
The two main forms are invoice factoring and invoice discounting – they solve the same problem but differ in who manages collections and whether it's disclosed to your customer
Selective invoice financing lets you choose which invoices to finance, rather than committing your entire ledger
The cost is a flat fee per financed invoice – not an annual rate, making APR comparisons misleading
It works best for product businesses with healthy margins and predictable payment cycles; it's less suited to businesses with very thin margins
What is invoice financing?
Invoice financing is a form of short-term funding that lets businesses advance cash against unpaid customer invoices. Instead of waiting 30–90 days for a customer to settle, you access a percentage of the invoice value upfront – typically up to 90% – and the remainder (minus fees) once the customer pays.
It's a receivables-side tool. That distinction matters: invoice financing helps you get paid faster on work already done. It's not designed to fund purchases or supplier payments – that's what inventory financing and supplier financing are for. If your constraint is on the buy side, those are the more relevant tools. If your constraint is on the sell side – you've already shipped, you're just waiting – invoice financing is built for that gap. The umbrella term covers two main structures: invoice factoring and invoice discounting.
Invoice factoring vs invoice discounting: what's the difference?
Both unlock cash against unpaid invoices. The differences lie in who manages the collections process and whether your customers know a third party is involved.
| Invoice factoring | Invoice discounting | |
|---|---|---|
| Who manages collections | The finance provider | You |
| Disclosed to your customer | Yes – customer pays the provider directly | No – customer pays you as normal |
| Ledger commitment | Often full ledger | Can be selective |
| Admin burden | Lower – provider handles chasing | Higher – you stay responsible |
| Customer relationship control | Reduced | Retained |
| Best suited for | Businesses comfortable outsourcing collections | Businesses that want to stay in control |
Selective invoice discounting – where you choose which invoices to finance rather than committing your whole ledger – is increasingly the preferred structure for growing product businesses. It gives you flexibility: finance the invoices that matter, leave the others untouched.
Treyd Advance is an undisclosed, selective invoice financing facility. Your customers pay you as normal, you stay in control of the relationship, and you choose which invoices to advance against.
How invoice financing works for product businesses
The mechanics are straightforward. Here's the typical cycle:
You ship goods to a B2B customer and issue an invoice – say, £15,000 with 60-day payment terms
You upload the invoice to the Treyd platform and advance up to 90% of the value – £13,500 – into your Treyd Wallet within 24 hours
You use those funds immediately: to place the next supplier order, cover operational costs, or take on the next opportunity
Your customer pays the invoice at day 60 as normal – they see no difference in the process
Treyd automatically settles the balance, minus the flat fee for the financing period
The key operational point: you're not taking on a loan or a credit line with a fixed term. You're advancing cash against a specific invoice, for a specific period, at a known cost. When the invoice is settled, the facility closes.
Practical scenario: bridging the gap between one big order and the next
A UK homewares brand – £2.5M annual revenue, selling to mid-market retailers – lands a £15,000 order from a new wholesale account. They ship on time and invoice immediately. Payment terms are 60 days.
The problem: their next production run needs to be placed within two weeks or they miss the seasonal window. The £15,000 sitting in accounts receivable would cover it, but it won't arrive for two months.
Using Treyd Advance, they advance 90% of the invoice – £13,500 – within 24 hours. The flat fee for a two-month financing period at 1.5% per month is £405. They place the production order, hit the seasonal window, and repay automatically when the retailer settles at day 60.
The cost of financing: £405. The margin on the next order made possible by it: well into four figures. The alternative – waiting, missing the window, losing shelf space to a competitor – had no visible price tag, but a very real one.
What does it cost?
The cost structure for selective invoice financing is a flat fee per invoice, based on the amount advanced and the financing period. There are no account fees, no setup costs, no minimum usage charges – you pay only when you use it.
Using Treyd Advance as an example: if you advance £9,000 against an invoice at 1.5% per month, the fee for a three-month period is £405. A one-month period costs £135. The fee is shown clearly before you confirm – no ambiguity about what a financing decision will cost.
A note on APR: annualizing a short-term flat fee makes the number look alarming and the comparison meaningless. Invoice financing is a short-duration facility – typically one to three months per invoice. The right question isn't "what's the annual rate?" – it's "what does this invoice cost to finance, and what does having the cash available now make possible?" For most product businesses with healthy margins, that calculation comes out clearly in favor of acting.
When invoice financing makes sense – and when it doesn't
Invoice financing earns its place when the cost of accessing cash is lower than the cost of waiting for it. It works well for product businesses that:
Sell to B2B customers on payment terms of 30 days or more
Have healthy gross margins – typically 25%+ – so the financing fee is a small percentage of what the invoice generates
Face predictable order cycles where the timing of cash in and cash out is clear
Want to preserve cash for growth without giving up equity or diluting ownership
It's less suited to businesses where:
Sales are primarily B2C – there are no trade invoices to advance against
Gross margins are very thin – below 15% – and the financing fee takes a disproportionate share of what's generated
Customer payment behavior is unpredictable or collection cycles are very long
The underlying problem is structural – consistent losses or a cash crisis that more working capital won't resolve
Invoice financing is a growth tool, not a rescue mechanism. The businesses that get the most from it are those that use it deliberately and repeatedly, as a way of keeping cash moving while their receivables cycle runs its course. For growing product businesses, the gap between needing capital and securing it through traditional channels is widening. According to the UK Finance Business Finance Review Q4 2025, medium-sized businesses saw lending grow just 4% in 2025 — and there are signs that firms are increasingly turning to alternative finance solutions to manage working capital as overdraft demand moderates.
Summary
Invoice financing solves one of the most common cash flow problems facing product businesses: the gap between shipping goods and getting paid for them. By advancing up to 90% of an unpaid invoice within 24 hours, it keeps cash moving through the business without requiring debt, collateral, or equity.
The two main forms, factoring and invoice discounting, solve the same problem differently. Selective invoice discounting gives you the most control: choose which invoices to finance, retain your customer relationships, and pay only for what you use.
The cost is a flat fee per invoice, not an annual rate. For businesses with healthy margins and predictable payment cycles, that fee is typically a fraction of what the invoice generates – and a fraction of what it costs to pass on the next opportunity because the cash wasn't there.
Used well, invoice financing is a deliberate tool for keeping growth moving while your receivables cycle does its thing.
About Treyd
Treyd is working capital built for product businesses. We help fast-growing brands, wholesalers, and distributors close the gap between paying suppliers and getting paid by customers – so cash flow stops being the thing that slows you down.
Buy first, pay suppliers later. Advance your customer invoices. No collateral, no lengthy bank process – just a simple, human experience built around how product businesses actually work.
Over 1,500 brands trust Treyd to fund their growth. See how at treyd.io/customers →
💜 Grow faster. Keep control. Bet bigger.
