Selective Invoice Finance

Selective invoice finance lets you release working capital from specific invoices or specific customer accounts, instead of signing up to fund your entire sales ledger.

For context, invoice finance and asset-based lending is not niche in the UK, it supports well over £20bn of funding at any one time, and 2024 client sales supported by invoice finance and ABL were reported at £313bn. UK Finance, Business Finance Review 2024 Q4 (PDF) UK Finance, IF/ABL overview

Want to estimate the numbers first? Use our invoice finance calculator to get a rough sense of how much cash you could unlock from an invoice.

What is selective invoice finance?

Selective invoice finance (sometimes called single invoice finance, spot finance, or selective invoice discounting) is a form of invoice finance where you choose what gets funded. Instead of financing your whole debtor book, you pick either:

• Specific invoices (common in spot factoring setups), or
• Specific customer accounts (common in selective invoice financing setups).

The British Business Bank explains it simply: selective invoice financing gives flexibility to finance selected customer accounts, while spot factoring can be used to finance distinct invoices. British Business Bank, Invoice finance guide

If you want a short definition, our finance dictionary entry is here: Selective invoice financing, definition.

How it works, step by step

1. You choose what to fund. That could be a single invoice for a large project, or a set of invoices from one strong customer.
2. You submit the invoice details. The provider checks the invoice is valid, that it relates to delivered goods or services, and that the customer is likely to pay.
3. The provider advances a percentage. Many invoice finance arrangements advance up to 80% to 90% of invoice value, with the remainder released (minus fees) when the customer pays. British Business Bank, advance rate overview
4. The customer pays. Depending on the product, the customer may pay you (more like discounting) or pay the provider (more like factoring and many spot deals).
5. Final balance is released. Once paid, you receive the remaining balance after fees.

One important point that many businesses miss: invoice finance is usually an advance on your receivables, not free money. If an invoice is disputed or unpaid, you can still be responsible under the agreement, unless you add separate bad debt protection. British Business Bank, disadvantages and responsibilities

When selective invoice finance makes sense

• You have a one-off cash gap, like payroll or supplier costs, but you do not want a long-term facility.
• You landed a large project with 30 to 90 day terms and need cash to deliver.
• You want control. You only finance the invoices that actually need it.
• You have mixed customers. One customer is strong and pays reliably, others are smaller or less predictable.
• You are seasonal. You want occasional support in peak months without committing year-round.

If your needs are more ongoing, a traditional facility may be simpler. To compare the core types, you can also read: invoice factoring and invoice discounting.

Selective finance vs factoring vs discounting

Option	What gets funded	Who chases payment	Will the customer notice?	Best for
Selective invoice finance	Chosen invoices or chosen customer accounts	Depends on structure	Depends on structure	One-off gaps, project spikes, keeping flexibility
Invoice factoring	Often most or all invoices in scope	Provider (credit control included)	Often yes	Smaller teams that want admin support
Invoice discounting	Often most or all invoices in scope	You (finance only)	Often no (can be undisclosed)	Established firms with strong credit control

The British Business Bank notes that invoice discounting is often undisclosed, so customers may not be aware, while factoring is more visible because the provider is involved in collections. British Business Bank, factoring vs discounting

Costs and typical terms

Costs vary by provider and deal structure, but most invoice finance pricing has two moving parts:

• Service fee, typically a percentage of invoice value (you pay for the facility and admin).
• Discount charge, similar to interest, based on how much you draw and for how long.

This fee structure is described in the British Business Bank guide, including the idea that you pay a service fee plus a discount charge. British Business Bank, Finance Finder, invoice finance costs

Selective structures can cost more per invoice than a full facility because you are buying flexibility. The trade-off is that you only pay when you actually use it, and you are not committing your whole ledger.

Eligibility checklist

Most providers care more about invoice quality and customer strength than your latest month of trading. A practical checklist:

• B2B invoices, invoice finance is typically built for business-to-business trading on credit terms.
• Clear proof of delivery, especially for services or milestone billing.
• Invoices not in dispute, disputes can stall funding.
• Reasonable payment terms, many providers prefer customers who pay within 30 to 90 days. British Business Bank, eligibility considerations
• Customer credit strength, stronger customers usually mean better advance rates and pricing.

Standards and what to check before you sign

Invoice finance for businesses is not always regulated the same way as consumer products, so your best protection is to be picky about providers and contracts. Many UK providers are members of UK Finance and follow the IF/ABL Standards Framework, which includes a Code and an independent complaints process. UK Finance, Standards Framework overview

Before you commit, check:

• All fees are clear, including minimum charges, audit fees, and exit fees.
• Recourse terms, what happens if the customer pays late or does not pay.
• How disputes are handled and what evidence is needed to prove delivery.
• Whether it is disclosed or undisclosed, and how customer communications work.

How Funding Agent helps you compare options

If you are unsure whether you need selective invoice finance, a full invoice facility, or a different working capital product, you can start by comparing routes side by side. Our platform matches businesses with relevant providers based on the basics you enter, then helps you move forward with the option that fits.

Start here: request funding. If you prefer to read first, our data-led overview is here: Invoice finance statistics UK 2026.

Common UK use cases by sector

If you want a more specific walkthrough, these sector guides show how invoice finance is typically used in different cash-flow patterns:

• Invoice financing for construction
• Invoice financing for engineering
• Invoice financing for digital agencies
• Invoice financing for logistics

FAQs

1) Is selective invoice finance the same as spot factoring?

They are closely related, but not identical. Selective invoice finance often refers to funding selected customer accounts, while spot factoring is often framed as funding distinct invoices. British Business Bank, other types

2) How fast can I get funds?

Once set up, invoice finance can provide funds quickly, often within about 24 hours of invoices being generated, depending on checks and the provider. British Business Bank, speed and process

3) How much of an invoice can I unlock?

Many providers advance up to 80% to 90% of invoice value initially, with the remainder (minus fees) released when the customer pays. British Business Bank, Finance Finder

4) Will my customer know?

It depends on the structure. Factoring is often visible because the provider manages collections, while discounting can be undisclosed. Selective and spot products can be structured either way depending on the provider and the deal. British Business Bank, visibility differences

5) What happens if my customer pays late, or disputes the invoice?

Invoice finance is not a substitute for getting paid. If an invoice is disputed or unpaid, you can still be responsible under the agreement, unless you have specific bad debt protection in place. British Business Bank, disadvantages

6) Is selective invoice finance suitable for small businesses?

It can be, especially if you have occasional funding needs and do not want an ongoing facility. The British Business Bank notes that for smaller turnovers, selective or spot invoice finance may be more suitable than a traditional facility. British Business Bank, suitability notes

7) How do I choose a reputable provider?

A practical starting point is checking whether the provider follows the UK Finance IF/ABL Standards Framework (Code plus independent complaints process), then reading the contract for fee clarity and exit terms. UK Finance, Standards Framework

Next step

If you want to see whether selective invoice finance is the right fit, start with a quick comparison and let us route you to relevant providers. Request funding