Selective invoice finance

Selective invoice finance advances cash against single invoices you choose, one at a time. You pay a fee for each invoice funded, worked out on its value and how long the customer takes to pay. It suits a business that needs cash against one large invoice or one slow customer.

Start a funding search Find what fits

How selective invoice finance works

You pick an invoice, or a run of invoices to one customer, and offer it to the funder. The funder checks the customer and the invoice, and if it accepts, pays you an agreed percentage of the invoice value. When the customer pays, the funder takes back its advance and its fee and pays you the balance.

Each invoice is a separate deal, which is why it is also called spot factoring or single invoice finance. You decide invoice by invoice whether to use it. You can use it once, or every month for one customer while the rest of your ledger stays with you.

The invoice is assigned to the funder in the same way as with factoring. Some funders notify your customer and collect the money themselves. Others let you collect and keep the arrangement confidential, but ask your customer to confirm that the invoice is genuine and will be paid in full. Ask which way a funder works before you offer it an invoice to your most important customer.

Funders offering selective finance include specialist invoice lenders and online platforms that fund invoices through investors. A funding search through Swoop can put a single invoice in front of more than one of them.

When it is used

One large order

A contract bigger than your usual work, where you pay out for materials and labour months before the customer pays. Funding that one invoice covers the gap for that contract alone.

A slow-paying large customer

A national retailer, a public body or a main contractor that sets long payment terms. You fund that customer’s invoices and collect the rest of your ledger as normal.

A seasonal peak

A few months a year when invoicing jumps and cash runs short. You fund invoices during the peak and stop when it passes.

What one invoice costs

Illustrative example

A £60,000 invoice to a large customer on 75-day terms, paid on the due date. The advance, the fee and the admin charge are assumptions for the arithmetic: each funder sets its own.

Advance paid to you at an assumed 80%: £48,000
Fee at an assumed 1.4% of the invoice per 30 days or part, for 3 periods: £2,520
Admin fee per invoice, assumed: £250
Balance released to you when the customer pays: £9,230
Total cost of funding the invoice: £2,770

As a yearly rate on the £48,000 you had in hand, £2,770 over 75 days works out at 28.1% a year (2,770 ÷ 48,000 × 365 ÷ 75). Two things push it up. The fee is charged on the full invoice value, which is larger than the money advanced. And the last 15 days are charged as a whole 30-day period. Run the same sum for every offer you get, using the invoice finance calculator.

Selective finance or a whole-ledger facility

	Selective invoice finance	Factoring or discounting
Which invoices	The ones you choose	Your whole sales ledger
Commitment	Each invoice on its own	Minimum term and notice period
Charges	A fee per invoice, often per period of days	Service fee on turnover plus a daily discount charge
Yearly cost if used constantly	Higher per pound drawn	Lower per pound drawn
Fits	Occasional or one-customer needs	A steady, ongoing need for cash

If you find yourself funding invoices every month, price a factoring or invoice discounting facility. The per-invoice fees that make sense for one order add up across a year.

Traders selling bread at a stall in Borough Market, London

What the funder checks on a single invoice

With selective finance the funder is lending against one customer, so that customer’s credit standing matters more than yours. It checks the customer’s filed accounts and payment record, and it may set a limit on how much it will fund against that name.

It then checks the invoice. Has the work been done or the goods delivered and accepted? Do the contract terms let the customer set off amounts, hold back a retention or dispute the price? Is the invoice due in full on a date, or does it depend on a milestone? An invoice for goods signed for in full is easier to fund than an application for payment on a building contract.

Expect to send the contract or purchase order, proof of delivery and the invoice itself. If the funder works confidentially, it will contact your customer in a way that confirms the invoice without explaining why. If a customer contract bans assignment, the 2018 regulations on assignment of receivables make that ban of no effect for contracts made on or after 31 December 2018, unless your business is a large enterprise.

Comparing selective finance offers

Selective finance fees are quoted in several different ways, which makes offers hard to compare on their face. One funder charges a single percentage of the invoice. Another charges per week or per 30 days. A third charges a discount rate on the advance plus a fixed fee. Convert each one to the same thing: the total cost in pounds if the customer pays on the due date, and again if it pays 30 days late.

Check what the fee is charged on, the invoice value or the advance, and how part periods are counted. Check whether the funder has recourse to you if the customer does not pay, and when. With recourse, an unpaid invoice comes back to you to repay after a set number of days. Some funders sell bad debt cover for a single invoice at an extra cost.

Selective finance is open to limited companies and LLPs through the funding search, and to sole traders and partnerships borrowing more than £25,000.

Invoice finance cost calculator

The cash an invoice finance facility releases and its total cost for a year, with the service fee on turnover included.

Open the calculator

Questions people ask

What is selective invoice finance?

It is invoice finance on single invoices you choose. A funder advances part of the invoice value, collects or receives payment from your customer and pays you the balance less its fee. Each invoice is agreed on its own, and you decide each time whether to use it. It is also called spot factoring or single invoice finance.

How much does single invoice finance cost?

Each funder sets its own fee, quoted as a percentage of the invoice, a charge per week or per 30 days, or a discount rate plus a fixed fee. Work out the total in pounds for your invoice if the customer pays on time and if it pays late. Convert it to a yearly rate on the money you receive to compare it with a whole-ledger facility or a loan.

Will my customer know?

That depends on the funder. Some notify your customer and collect the payment themselves. Others keep the arrangement confidential, with you collecting as normal, but still contact the customer to confirm the invoice is genuine. Ask before you offer an invoice, especially if the customer is important to you.

Can I fund one invoice from a new business?

It can be possible, because the funder relies mainly on your customer’s ability to pay. A young business invoicing a large, creditworthy customer for work it has completed may be funded where a loan would be refused. The funder will still want the contract, proof of delivery and some information about your company.

What happens if the customer does not pay?

With recourse selective finance, you repay the funder what it advanced plus its fees once the invoice is a set number of days overdue. Without recourse, the funder carries the loss if the customer becomes insolvent, up to an agreed limit, for a higher fee. Neither covers an invoice the customer disputes because of your goods or work.

Finance is subject to status and to the lender’s terms. A personal guarantee makes you liable for the company’s debt if it does not repay, and it can be enforced against your own assets, including your home. Nothing here is a personal recommendation.

All business funding

Selective invoice finance

How selective invoice finance works

When it is used

One large order

A slow-paying large customer

A seasonal peak

What one invoice costs

Selective finance or a whole-ledger facility

What the funder checks on a single invoice

Comparing selective finance offers

Invoice finance cost calculator

Questions people ask

Working capital

Invoice factoring

Invoice discounting

Invoice finance

Business funding for construction firms

Selective invoice finance

How selective invoice finance works

When it is used

One large order

A slow-paying large customer

A seasonal peak

What one invoice costs

Selective finance or a whole-ledger facility

What the funder checks on a single invoice

Comparing selective finance offers

Invoice finance cost calculator

Questions people ask

Working capital

Invoice factoring

Invoice discounting

Invoice finance

Business funding for construction firms

Start a funding search

Cover for a personal guarantee