What Is Invoice Funding and How Does It Work for Small Businesses?

TL;DR: Invoice funding lets a business access money tied up in unpaid invoices before customers pay. A provider advances most of the invoice value; when the customer pays, the advance is repaid with a transparent fee and the balance returns to the business. For businesses invoicing on 30, 60, or 90-day terms, it's faster access to money already earned.

What is invoice funding?

Invoice funding is a type of business finance that lets companies access money from unpaid invoices. Instead of waiting for customers to pay, a provider advances a portion of the invoice value upfront and is repaid once the invoice settles. It frees up working capital tied up in your accounts receivable.

Why businesses use invoice funding

Most B2B businesses sell on payment terms, which creates a gap between completing work and getting paid. During that gap, the business still has to cover wages, suppliers, materials, fuel, and new project costs. Invoice funding lets them access money already earned and keep operating without waiting out the terms.

"Every business invoicing on terms is effectively lending money to its customers, for free, for 30 or 60 days. Invoice funding flips that back. You get access to what you've already earned, so the wait stops dictating what your business can do next."

Matt Peacey, Founder & CEO, FundTap

How invoice funding works (5 steps)

1. You issue an invoice for goods or services delivered, e.g. $10,000 on 30-day terms.
2. You submit the invoice for funding. Once approved, it's eligible to fund.
3. You receive an advance against the invoice value, paid quickly.
4. Your customer pays the invoice on the agreed terms.
5. The funding settles, the advance is repaid to FundTap with a transparent fee, completing the cycle.

A worked example

A transport company issues a $50,000 invoice on 45-day terms. Without funding, it waits 45 days. With invoice funding, it accesses an advance against that invoice soon after issuing it, uses the cash to cover operating costs and new work, and the advance is repaid with the fee when the customer pays, so the business keeps moving while it waits.

What it costs and how the risk stays low

With FundTap you pay a single fee from 4% on the invoices you choose to fund, no monthly fees, no lock-in. Because funding is selective (you fund one invoice at a time, not your whole ledger), risk stays low: the loss rate is 0.71% (FundTap, BNZ presentation 2025). The average advance runs about $32K over roughly 33 days, and the median time from sign-up to first fund is 3 days (FundTap data, 2026).

See how FundTap works → Rated 5★ on Google (117 reviews) · 4.9★ on the Xero App Marketplace (107 reviews).

Frequently asked questions

What is invoice funding?

A type of business finance that lets you access money from unpaid invoices, a provider advances part of the invoice value upfront and is repaid when the customer pays.

How is invoice funding different from invoice finance?

They're the same thing, "invoice funding" and "invoice finance" are used interchangeably for funding linked to your invoices.

How does invoice funding work?

You issue an invoice, submit it for funding, receive an advance against its value, your customer pays on terms, and the advance is repaid with a transparent fee.

What does invoice funding cost?

With FundTap, a single fee from 4% on the invoices you choose to fund, no monthly fees and no lock-in.

What types of businesses use invoice funding?

Mostly B2B businesses that invoice customers on payment terms, common in transport, construction, labour hire, wholesale, and professional services.

How fast is the money?

Funds arrive in hours once you're set up; the median time from sign-up to first fund is 3 days.