What is selective invoice finance?
Selective invoice finance is quite different to the other forms of invoice finance, for a few reasons. First, it doesn’t involve an agreement for the whole sales ledger — you choose which invoices you’d like to have advanced. That gives you flexibility to adjust your cashflow position by selling single invoices or choosing a few at a time, depending on your business needs.
Selective invoice finance explained
Doesn’t involve an agreement for the whole sales ledger
Selective invoice finance is quite different to the other forms of invoice finance, for a few reasons. First, it doesn’t involve an agreement for the whole sales ledger — you choose which invoices you’d like to have advanced. That gives you flexibility to adjust your cashflow position by selling single invoices or choosing a few at a time, depending on your business needs.
You generally get advanced more
Second, because you’re financing individual invoices you generally get advanced more. With selective invoice finance it’s not uncommon to be advanced 100% of the invoice value and then pay a fee, so transactionally it’s simpler than invoice factoring or invoice discounting.
Lender’s risk depends on your customers
Most importantly, with single invoice finance the lender’s risk depends on your customers rather than your own business — which means it’s aimed at established businesses that trade with creditworthy customers. For example, if your business has a healthy turnover, many years of trading history, and invoices large multinationals, single invoice finance should be viable. On the other hand, a startup trading with other SMEs will most likely have to look at other forms of invoice finance like factoring.
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How does spot factoring work?
Can be different from selective invoice finance
Spot factoring is often used as a synonym for selective invoice finance, but the two terms can mean different things.
Choosing specific invoices to finance
In some contexts, ‘spot factoring’ is the name given to choosing specific invoices to finance, and ‘selective invoice finance’ refers to selecting specific customers whose invoices you’ll finance.
The two terms are not used consistently
However, the two terms are not used consistently in the market, so this page refers generally to any type of invoice finance that offers flexibility for what portion of your sales ledger you choose to finance.
Unpredictable cash flow cycles
Selective invoice finance can be a great arrangement for eligible businesses with unpredictable cash flow cycles, because how much or how little you finance is in your hands (unlike other facilities, which finance the whole sales ledger by default).
No lengthy contract
Another key advantage of single invoice finance is that there’s no lengthy contract with this type of facility, so you’re not committed for a set period of time. Overall, it’s a useful option for businesses with irregular sales, or a mixture of large and small customers, but it can be difficult — or impossible — for smaller companies to access.
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Representative example*
• 7.63% APR Representative based on a loan of £50,000 repayable over 24 months.
• Monthly repayment of £2,252.94. The total amount payable is £54,070.56
*Some lenders may apply fees during the application process, please note that these are set and provided by these entities.
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Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.
It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.
Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.
