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The Invoice Finance Stigma: Myths vs. Reality
- Danielle Davis
- Mar 15
- 3 min read
Invoice finance is a powerful tool for businesses looking to manage cashflow effectively. Yet, despite its benefits, it often carries a stigma that deters businesses from considering it as a viable funding option. Many believe it’s too expensive, only used by struggling businesses, or that factoring companies aggressively chase clients for payment. However, these are misconceptions that need to be addressed.
Myth 1: Invoice Finance Is Too Expensive
One of the most common misconceptions about invoice finance is that it costs too much. Many business owners compare it to traditional business loans or overdrafts without realising that invoice finance is often the more cost-effective option.
Unlike commercial loans, which come with fixed monthly repayments and interest that accumulates regardless of revenue, invoice finance is based on actual sales. Fees are typically a small percentage of the invoice value, and businesses only pay for what they use. Compared to waiting months for customer payments or taking out high-interest loans, invoice finance can actually improve profitability by ensuring a steady cashflow and preventing missed opportunities due to cash shortages.
Myth 2: Only Businesses That Can’t Get Traditional Finance Use It
Another stigma surrounding invoice finance is that it’s a “last resort” for businesses that can’t secure funding elsewhere. While invoice finance is a great alternative for businesses that may not meet traditional bank lending criteria, it is widely used by well-established, successful companies across various sectors.
The truth is, many businesses prefer invoice finance over loans or overdrafts because it grows in line with sales. As your business invoices more, your available funding increases - something a fixed loan cannot offer. This flexibility makes it a preferred choice for companies experiencing rapid growth or those in industries with long payment terms, such as recruitment, haulage, and manufacturing.
Myth 3: Factoring Companies Are Aggressive with Clients
A major concern with Invoice Factoring is that the finance provider takes over credit control and might be aggressive when chasing payments. Business owners worry that this could damage customer relationships and make their company appear financially unstable.
While it’s true that Invoice Factoring involves lenders managing collections, not all providers take an aggressive approach. In fact, many invoice finance companies have professional and experienced credit control teams that act professionally and respectfully, helping to maintain strong client relationships. Some businesses even find that using an Invoice Factoring company improves their payment times because a dedicated team is managing collections on their behalf.
For those who prefer to keep credit control in-house, Invoice Discounting allows businesses to access funding while retaining full responsibility for collections. This means customers remain unaware that invoice finance is being used.
The Invoice Finance Stigma - Breaking the Black Sheep Perception
Invoice finance has unfairly been viewed as the black sheep of business funding for too long. The reality is that it’s a highly effective financial solution that supports growth, stability, and flexibility. By unlocking working capital tied up in unpaid invoices, businesses can pay suppliers, cover operating expenses, and invest in new opportunities without waiting for customers to pay.
At 12s Finance, we understand the concerns surrounding invoice finance, and we’re here to help businesses find the right lender that aligns with their needs. We ultimately match UK B2B businesses with the best funding providers, ensuring transparency and fair treatment.
If you’ve dismissed invoice finance because of outdated misconceptions, it’s time to take another look. Get in touch with 12s Finance today and discover how the right funding solution can transform your business.