How Does Invoice Finance Work?

Imagine you’re a business providing services to another business. You issue an invoice for those services, with payment terms typically ranging from 30 to 90 days. Instead of waiting for your client to pay within these terms, invoice finance steps in to expedite the cash flow process. On the day you issue the invoice, invoice finance advances you a portion of its value, injecting much-needed cash into your business immediately.


Industries Benefiting from Invoice Finance

While invoice finance can be advantageous across various sectors, certain industries derive significant value from its implementation. Key sectors include:

  • Labour Hire
  • Traffic Management
  • Security
  • Cleaning
  • Transport and Logistics
  • Wholesale and Distribution
  • Manufacturing
  • Civil Works

Industries Not Suited to Invoice Finance

While invoice finance proves beneficial for many businesses, certain industries face complexities that render them unsuitable candidates. For instance, retail trade is not suitable simply because credit is not given at the time of sale. However, Fifo Capital has other funding facilities which may be made available to retailers – give us a call.

Breaking Down Stigmas Surrounding Invoice Finance

In the past, invoice finance was often viewed as a last-resort solution, associated with businesses facing financial distress. However, perceptions have shifted drastically in recent years. Today, invoice finance is recognised as a cost-effective working capital solution, offering businesses the flexibility they need to thrive. While some apprehension may linger regarding customer perceptions, the reality is that accessing working capital is a strategic necessity for many businesses, ensuring continuity and growth.

Understanding Interest Rates in Invoice Finance

Interest rates in invoice finance are calculated solely on the outstanding amount and for the duration it remains outstanding. This flexible structure means that businesses can optimise their finance costs based on their specific cash flow needs. In many cases, invoice finance proves to be an extremely affordable financing option, especially for businesses that only draw down funds periodically.

Real-Life Scenario: A Case Study

Consider the scenario of a transport company, where invoice finance played a transformative role. By leveraging invoice finance, the company gained instant access to outstanding cash, enabling them to scale their operations and significantly increase revenue. With the overall cost of the finance facility amounting to just 1% of their annual gross profit, the decision to utilise invoice finance was clear-cut.

In essence, invoice finance is not merely a financial tool but a strategic enabler for businesses seeking to optimise cash flow, drive growth, and seize opportunities. At Fifo Capital, we specialise in providing tailored invoice finance solutions to empower businesses on their journey to success. Let’s collaborate and unlock the full potential of your business together.


Contact Us to explore how invoice finance can transform your business’s cash flow dynamics and propel growth initiatives forward.