How invoice factoring actually works, from invoice to cash

Invoice factoring sounds technical, but day to day it is simple: raise an invoice, upload it, draw the cash. Here's what actually happens behind that.

The short version

A funder advances you most of an invoice's value — typically up to 90% — within a day or two of you raising it. When your customer pays, you receive the remaining balance, minus a fee. Because it's based on your invoicing, the available funding grows automatically as your sales grow.

Step by step

1. Raise the invoice as you normally would when work is complete.
2. Upload it to the funder — uploads often sync straight from cloud accounting software.
3. Receive the advance, usually within 24 to 48 hours.
4. The funder collects payment from your customer on the agreed terms.
5. Once the customer pays, the balance is released to you, less the fee.

What makes it different from a loan

There's no lump sum and no monthly repayment schedule. Your customers' payments settle the advances, so the facility is effectively self-liquidating. The funder does the heavy lifting at set-up; for you, it stays a three-step routine.

Who it suits

UK SMEs invoicing other businesses on credit terms, ideally with a spread of creditworthy customers and clean paperwork. If you invoice and then wait to be paid, factoring is worth a look.