Invoice Financing for Startups
Turn the invoices your customers have not paid yet into working cash today.
What is Invoice Financing?
Invoice financing lets you unlock cash that is tied up in unpaid invoices. When you sell to other businesses, or to government, you often wait 30, 60, or even 90 days to get paid. Invoice financing advances most of that money to you within a day or two, so you can cover payroll, buy inventory, or take on the next order without waiting.
There are two main forms. With invoice factoring, you sell your unpaid invoices to a finance company, which advances most of the value and then collects payment from your customer. With invoice discounting, you borrow against your invoices but keep control of collections yourself, so your customers usually never know. Factoring is often easier to qualify for and common for younger companies, while discounting is usually confidential and suited to businesses with steady, established receivables.
Because you are borrowing against money you have already earned, invoice financing does not require you to give up any equity. It scales naturally with your sales, so the more you invoice, the more cash you can unlock. That makes it a useful non-dilutive layer once you have real B2B revenue coming in.
How it works
- 1You deliver your product or service and send the invoice to your business customer as usual.
- 2You submit that invoice to a financing provider, which advances you a percentage of its value upfront, often within one to two business days.
- 3Typical advance rates run from about 70% to 90% of the invoice value, with the rest held back as a reserve.
- 4Your customer pays on their normal terms. With factoring the provider collects directly, while with discounting you collect and then repay the advance.
- 5Once the invoice is paid, you receive the remaining reserve minus the provider's fee.
Why founders use it
- Fast cash flow, because you can convert a 30 to 90 day wait into funds in a day or two.
- No equity given up, so it is non-dilutive and you keep full ownership of your company.
- Often easier to qualify for than a bank loan, because approval leans on your customers' creditworthiness rather than your own track record.
- Scales with revenue, so as you invoice more your available funding grows automatically.
- Works for young companies, since many providers will fund startups with limited credit history.
Best for
- B2B and B2G startups that invoice creditworthy business or government customers on net 30 to net 90 terms.
- Companies growing faster than their cash flow, where money is stuck in receivables.
- Sectors with long payment cycles, such as staffing, logistics, manufacturing, wholesale, and professional services.
Things to weigh
- It only works if you invoice other businesses or government. It does not fit consumer (B2C) sales that are paid upfront.
- It usually costs more than a bank loan. Fees commonly run around 1% to 5% of the invoice value, and the effective annual cost can be higher than the headline rate.
- With recourse factoring, the most common kind, you must buy back any invoice your customer fails to pay. Non-recourse shifts that risk to the provider but costs more.
- Factoring can put the provider in contact with your customers, so choose between factoring and confidential discounting based on the relationship you want to protect.
Typical terms at a glance
- Typical amount
- About 70% to 90% of each invoice advanced upfront, scaling with your total receivables
- Cost / terms
- Fees commonly around 1% to 5% of invoice value; recourse or non-recourse; available per invoice or whole-ledger
Ranges are general guidance for orientation, not quotes. Real terms vary by provider, country, and your profile.
How Grantverse helps with invoice financing
Grantverse sizes how much invoice financing your receivables can realistically unlock from your revenue profile, then surfaces specific providers and honest cost ranges so you can weigh this layer against the rest of your stack.
Frequently asked questions
What is the difference between invoice financing and invoice factoring?
Invoice financing is the umbrella term. Factoring is one type, where you sell the invoice and the provider collects from your customer. Invoice discounting is another type, where you borrow against the invoice but keep collecting yourself. People often use invoice financing and factoring to mean the same thing.
Does invoice financing dilute my ownership?
No. You are advancing money you have already earned, so you give up no equity. It is a non-dilutive way to fund growth, which is why it sits among the layers you fill before raising equity.
Can a startup with little credit history qualify?
Often yes. Approval depends mostly on the creditworthiness of the customers you invoice rather than your own credit score, so young companies with strong customers can frequently qualify.
How much does invoice financing cost?
It varies, but fees commonly run around 1% to 5% of the invoice value, depending on your customers' credit, the payment terms, and the volume you finance. The effective annual cost can be higher, so it is worth comparing against cheaper layers first.
How fast can I get the money?
Once you are set up, many providers advance funds within one to two business days of you submitting an approved invoice.