What is selective invoice finance?
Selective invoice finance is quite different to the other forms of invoice finance, for a few reasons. First, it doesn’t involve an agreement for the whole sales ledger — you choose which invoices you’d like to have advanced. That gives you flexibility to adjust your cashflow position by selling single invoices or choosing a few at a time, depending on your business needs.
Second, because you’re financing individual invoices you generally get advanced more. With selective invoice finance it’s not uncommon to be advanced 100% of the invoice value and then pay a fee, so transactionally it’s simpler than invoice factoring or invoice discounting.
Most importantly, with single invoice finance the lender’s risk depends on your customers rather than your own business — which means it’s aimed at established businesses that trade with creditworthy customers. For example, if your business has a healthy turnover, many years of trading history, and invoices large multinationals, single invoice finance should be viable. On the other hand, a startup trading with other SMEs will most likely have to look at other forms of invoice finance like factoring.
Spot factoring is often used as a synonym for selective invoice finance, but the two terms can mean different things.
In some contexts, ‘spot factoring’ is the name given to choosing specific invoices to finance, and ‘selective invoice finance’ refers to selecting specific customers whose invoices you’ll finance.
However, the two terms are not used consistently in the market, so this page refers generally to any type of invoice finance that offers flexibility for what portion of your sales ledger you choose to finance.