TL;DR: The cheapest way to fund unpaid invoices depends on how much you need, how often, and for how long. For one-off gaps, an overdraft may be cheapest. For ongoing working capital tied to invoices, on-demand invoice finance often costs less than you think — especially when you factor in the hidden costs of alternatives.
Before comparing funding options, consider the cost of doing nothing. When cash is tied up in unpaid invoices, you may:
The cost of inaction is real, even if it does not appear on an invoice.
Cost: 5–15% p.a. interest + annual facility fee ($200–$500+)
Pros: Flexible, instant access within limit
Cons: Fixed limit, can be reduced by bank, may require security
Cost: 6–25% p.a. depending on provider and security
Pros: Lump sum for specific needs
Cons: Creates debt, fixed repayments regardless of cash flow, slow approval
Cost: 1–5% per month + service fees + potential minimums
Pros: No property security, collections handled for you
Cons: Customer notification, whole-ledger, lock-in contracts
Cost: Single fee from 4% per invoice
Pros: No debt, no lock-in, confidential, funded in hours, scales with revenue
Cons: Only works if you have B2B invoices
To compare properly, calculate the cost per dollar of funding per day. A 4% fee on a $10,000 invoice paid in 30 days costs $400 — equivalent to roughly 48% p.a. if you think of it as an annual rate. But this comparison is misleading because:
The cheapest option is the one that matches your actual needs. For businesses with regular invoicing and slow-paying customers, invoice finance is often the most cost-effective solution when you account for flexibility, zero lock-in, and no debt impact.