How does selective invoice finance work?

With 27% of UK businesses earning between £1M and £500M now using invoice finance – a huge rise when compared to the 0.86% that was predicted to use this form of funding back in 2014 – we thought it was a good time to shed some light on invoice finance and it’s slightly lesser known little sister, selective invoice finance.

Find out everything you need to know to make the best decision for your business in today’s article.

What is invoice finance?

Invoice finance allows you to access tied up funds to boost cash flow. With invoice finance, the lender provides the funds (usually not surpassing 90% of the total amount) available from your unpaid invoices. Later, they usually collect the funds either from you or directly from your end client.

How is selective invoice finance different?

While invoice finance usually involves selling off your entire ledger, selective invoice finance enables you to be selective with what you release to the lender. You can choose to use a single invoice as security for a loan, or you could select several. The choice is yours.

Selective invoice finance can, in some cases, come with higher fees when compared to standard invoice finance. It can also involve the lender checking out the creditworthiness of your customers, as opposed to basing the decision solely on your business.

Be aware it will likely still be your job to chase and collect payments from customers. Invoice finance is only as good as the strength of your debtors and customers may have to change the account they pay into, making it admin heavy.

How does selective invoice finance work?

Step one: Decide which invoices you’d like to use as security. You might choose based on your understanding of your clients (for example, you may have a client who is credible and always pays, but they always pay at the very end of the full 30 day payment terms) or you might choose based on payment terms, dates, or the amount.

Step two: Choose a lender. We might be able to help with that. Just fill in this form and we’ll let you know if you’re eligible to be connected to our network of over 120 lenders offering between £1,000 and £20M. If you’re accepted for funding, you’ll need to submit your chosen invoices to the lender.

Step three: The lender will perform a few checks. They may check the business or personal credit scores of you or your clients, depending on whether your clients are limited companies, start ups, or sole traders.

Step four: If everything checks out, the funds will be released to you. This usually amounts to somewhere between 70-90% of the total invoice amount.

Step five: You (or your customers directly) will repay the loan amount, plus fees.

Find a lender with Funding Options by Tide

We help connect borrowers to suitable lenders. If you’re looking for selective invoice finance (or another form of finance) just click the link below and submit your information to determine eligibility.

Apply for selective invoice finance

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.