Selective invoice finance: fund a few large invoices or the whole ledger?

A large unpaid invoice can leave your business short of cash even when the work is profitable. Before choosing a funding arrangement, separate two questions: how much cash do you need, and how often does the same gap return?

Which invoices should you discuss with a provider?

Prepare a short record of the business customer, invoice value, work or goods supplied, due date and payment history. Identify disputed amounts, credit notes and any existing finance arrangement affecting the same receivable. Ask the provider which invoices it would accept, what evidence it needs and whether a customer limit restricts the amount available.

An invoice is evidence to assess, not an automatic funding approval. The British Business Bank’s preparation checklist emphasises accurate accounts, trading history and payment records. Check the actual provider’s criteria rather than relying on a general minimum-turnover or invoice-size rule.

Start with the cash gap, not the invoice total

Write down the payments your business must make before the customer is expected to pay. Include wages, suppliers and other committed outgoings, then deduct cash you can safely use and receipts expected during that period. Keep a separate allowance for delays.

Illustrative planning example: a company has a £200,000 invoice due in 60 days. It needs £145,000 for committed payments before then and can allocate £25,000 of existing cash. Its initial gap is £120,000.

If a hypothetical written offer advanced 80% of that invoice, the gross advance would be £160,000 and the retained balance £40,000. Those figures are arithmetic assumptions, not available terms. Check whether charges are deducted upfront, whether the full invoice is accepted and when cash would actually arrive.

Repeat the forecast with the customer paying 30 days later. Does the advance still cover the gap? What extra charges or repayment obligations would the delay trigger? Do not treat the retained balance as cash available today.

For temporary staffing businesses, our recruitment payroll planning guide shows how to map payroll dates against customer receipts.

Compare occasional funding with an ongoing facility

The British Business Bank identifies selective and spot arrangements as possible options for occasional working-capital needs. An ongoing facility deserves consideration when the need repeats across the ledger. Source: British Business Bank.

A useful comparison uses the same invoices, payment dates and cash requirement for each quote. Otherwise, a lower percentage can disguise a less suitable arrangement.

Ask for costs in pounds

Costs depend on the provider's fee structure, invoice value, customer payment history and frequency of use. Capitalise also describes both confidential and disclosed arrangements, with collection methods depending on the facility. These features must be confirmed for the actual offer. Source: Capitalise.

Ask each provider to complete the same comparison:

• Net cash received on the first funding date.
• Total charges if the customer pays on time.
• Total charges if payment arrives 30 days late.
• Any setup, subscription, minimum, transfer or termination charges.
• Which amount each percentage applies to: invoice value, funds advanced or another basis.
• Any commitments during months when you fund nothing.

Keep the written answers alongside the agreement. Do not assume that “selective” means no ongoing commitment, or that the smallest quoted percentage produces the lowest total cost.

What an advance could leave after charges

This separate, invented example shows how to read a fee schedule. It is not typical market pricing, a quote or an available Bene Finance offer.

Assume a £100,000 invoice, an 80% gross advance, a service charge of 1% of the invoice deducted immediately, and a simple daily charge of 0.02% of the £80,000 advance. Assume the advance remains outstanding until the customer pays in full and the daily charge is deducted from the retained balance.

The 30-day delay adds £480 under these assumptions. VAT on any applicable charges and all other fees are excluded. Real agreements may calculate, collect or compound charges differently. Ask for the provider’s own cash schedule for the same payment dates; do not substitute these assumptions for its terms.

Check who pays whom, and what happens if payment fails

Before accepting, ask who collects the invoice, where the customer must send payment and what communication the customer will receive. Clarify who resolves disputes and how payments accidentally received into your own account must be handled.

Ask the provider to explain in writing what you would owe if the customer paid late, paid only part of the invoice or did not pay at all. Request the exact terms governing recourse, any credit protection, exclusions, security and personal guarantees. Do not assume that financing an invoice transfers every risk attached to it.

Compare invoice factoring and invoice discounting when deciding which questions to ask about sales-ledger control and customer collections.

Prepare a short funding brief

Your brief should explain the cash problem without making the reader reconstruct it from attachments. Set out:

• The amount needed and the date it is needed.
• The invoice or customer accounts you want assessed.
• Expected receipt dates and previous payment experience.
• Whether this is occasional or recurring.
• A simple forecast showing normal and delayed payment cases.
• Existing finance arrangements the provider needs to consider.

Ask for the provider's document list before sending sensitive records. Be ready to explain credit notes, disputed amounts or unusual payment arrangements.

Discuss the requirement before choosing the structure

The right starting point is a clear cash requirement and a complete written comparison. A selective arrangement may address a specific gap; a recurring gap warrants a broader discussion about the business's working capital.

Read Bene's invoice finance guide for the wider product overview. If you want to discuss your company's requirement, contact Bene Finance. Bene Finance acts as an introducer. Availability, eligibility and terms depend on the relevant provider; an enquiry is not a funding approval.