Your 2025 Guide to Invoice Financing
What Is Invoice Financing?
Invoice financing, also known as receivables financing, is a short-term funding solution that allows businesses to borrow against their unpaid invoices. Unlike traditional unsecured business loans, invoice financing uses outstanding invoices as collateral, enabling businesses to access cash upfront. This business practice is sometimes known as factoring, or invoice factoring.
Businesses that sell goods or services on credit often face delayed payments, which can disrupt cash flow and hinder growth. Invoice financing provides an effective way to bridge the gap, ensuring that SMEs have the necessary working capital to cover operating expenses and invest in growth opportunities.
How Does Invoice Financing Work?
When businesses issue invoices with payment terms extending over weeks or months, their revenue remains locked until customers settle their dues. This delay can limit operational flexibility. Invoice financing helps SMEs unlock funds by allowing them to borrow a percentage of the invoice value before the payment is due.
For example, businesses working with government agencies through platforms like Vendors@Gov may need to wait 30 days or more for payment, depending on the payment term provided. With invoice financing in Singapore, they can convert their invoices into cash almost immediately, mitigating cash flow constraints and ensuring business continuity.
Invoice Financing Vs Factoring
Factoring
Think of this as selling your invoices to a third-party company. They pay you a percentage of the invoice amount immediately, and they then collect the full amount owed from your customer. You are essentially selling your future income for cash right now.
Invoice Financing
This is borrowing money against your unpaid invoices. A lender gives you a loan based on the value of your outstanding invoices. You are still responsible for collecting the money from your customers, but the lender provides you with cash upfront.
|
Invoice Financing |
Factoring |
|
|
Invoice ownership |
Business that creates the invoice owns it |
Factoring company that buys the invoice becomes the owner |
|
Invoice collection |
Handled by the business that created the invoice |
Handled by the factoring company |
|
Financial company’s fee |
A percentage on the amount of cash advance (aka loan) will be charged |
The invoices are purchased for less than their actual dollar value |
Is Invoice Financing Right For Your Business?
If you’re an SME owner facing cash flow gaps due to delayed invoice payments, invoice financing can be a game-changer. It provides quick access to funds, allowing you to focus on scaling your business rather than waiting on payments.
Key Benefits of Invoice Financing in 2025
1. Faster Access To Cash
Rather than waiting for customers to settle invoices, businesses in Singapore can access funds within 48 hours of approval with Poss Capital.
2. No Additional Collateral Needed
Unlike traditional loans, invoice financing only requires outstanding invoices with good credit terms as collateral, safeguarding other business assets.
3. Flexible Credit Terms
With invoice financing, businesses can offer longer credit terms to customers while maintaining a healthy cash flow, making them more competitive in securing larger contracts.
4. Supports Business Growth
By unlocking working capital, businesses can reinvest in expansion, marketing, and operational improvements without financial strain.
Eligibility Requirements For Invoice Financing
While eligibility criteria may vary, most lenders require businesses to:
- Sell goods and/or services on credit: This means you provide products or services to customers and expect to receive payment later.
- Have a minimum annual income: Most lenders require a business revenue to be at least S$100,000 per year.
- Have invoices for past sales: Proof of sales in the form of invoices will enable you to be eligible for invoice financing.
Payd Invoice Financing with Poss Capital
At Poss Capital, we specialise in helping SMEs grow by providing fast and hassle-free financing solutions:
- Up to S$100,000 in invoice financing, split into 3 equal repayments.
- Factor fee as low as 1.2% per month.
- One time 5% disbursement fee, deducted upfront.
- Transparent fees. You’ll always know exactly how much you have to pay.
- No prepayment penalties. Repay early without extra charges.
Key Requirements for Invoice Financing with Poss Capital
- Credit terms on the invoice must not have lapsed
- Sole-Proprietorship and Partnership are currently ineligible
- Personal guarantees from key business stakeholders may be required
How Do We Differ From Other Invoice Financing Providers in Singapore?
Payd by Poss does not offer an invoice financing line with a pre-approved credit limit. Instead, it considers individual invoices submitted during each application. Find out how much you can receive with our Payd invoice financing calculator here.
We understand that a lump sum repayment immediately after receiving your invoice payment would drastically impact your cash flow. Hence, we divided repayment into 3 equal amounts payable, letting you better manage your business cash flow.
Industries That Benefit Most From Invoice Financing
Government Contractors
Government payments are secure but often delayed. Invoice financing ensures immediate access to cash to maintain operations.
FMCG Suppliers to Supermarkets
Supermarkets may take up to 120 days to process supplier payments. Invoice financing bridges this gap, ensuring steady cash flow.
Employment and Labour Agencies
These agencies such as security guard services firms and construction foreign workers manpower supply companies typically pay their workers every month, but their clients might take more than 30 days to pay them. Invoice financing helps maintain payroll without disruptions.
Construction and Engineering Firms
Large projects require upfront capital, and invoice financing provides the liquidity needed to pay workers and procure materials.
Why Choose Poss Capital for Invoice Financing in 2025?
Unlike traditional invoice financing providers, Payd by Poss evaluates individual invoices on a case-by-case basis rather than imposing a pre-approved credit limit. Our repayment plan is also structured in three equal instalments, allowing businesses to manage their cash flow more effectively.
Ready to unlock cash flow and take your business to the next level?
Apply now with Poss Capital and experience faster, simpler invoice financing in 2025!
Start TodayFAQs about Invoice Financing in Singapore
Invoicing financing is a type of short-term financing that allows SMEs to get cash upfront based on their unpaid invoices. This can help to improve cash flow and avoid waiting for customers to pay their bills.
Invoice financing and short-term loans provide cash upfront, but invoice financing is specifically tied to your unpaid invoices, often has lower interest rates and a faster approval process. Short-term loans are based on your overall business health, have higher interest rates and a longer approval process.
Typically, businesses with a good credit history, established operations, and a steady stream of invoices are eligible. However, specific requirements may vary between providers.
Costs can include interest rates, processing fees, and other charges. It's essential to compare offers from different providers to find the best terms.
The approval process can vary, but it's generally quicker than traditional loans. Some providers can offer same-day or next-day approvals.
Typically, invoices for goods or services sold on credit are eligible. However, there may be restrictions on certain industries or types of invoices.
Imagine you're a furniture manufacturer who sells a large number of chairs to a big department store chain. Instead of immediate payment, you agree to sell the chairs on credit, meaning the department store will pay you at a later date.
To keep track of this agreement, you issue an invoice to the department store. The invoice lists the details of the order, the total cost of the chairs, and the agreed-upon payment date. This invoice serves as a formal record of the transaction.
While you're waiting for payment, your cash flow might be tight. To address this, you could use invoice financing. This means you can pledge your invoice to a financial company. They'll pay you a percentage of the invoice amount upfront, and they will collect the loaned amount at the agreed upon date(s) from you. This helps you get the cash you need without having to wait for the department store to pay.
If you're experiencing cash flow challenges, need to accelerate growth, or want to reduce the risk of bad debts, invoice financing might be a good option. It's best to consult with a financial advisor to determine if it's the right fit for your specific needs.
