How does selective invoice finance work?
Answer
Selective invoice finance works by funding individual invoices on a per-invoice basis, rather than committing the entire receivables ledger to a funder. The business chooses which invoices to fund and when. The funder advances a portion of each selected invoice's value upfront (typically 70% to 95%), collects repayment from the underlying invoice when the end debtor settles, and returns the balance less a fee. There is no ongoing facility, no monthly minimum, and no obligation to fund the next invoice.
Detail
The selective model differs from whole-of-ledger invoice finance on the unit of commitment. Whole-of-ledger arrangements assign all current and future receivables to the funder under a single contract; the funder takes a charge over the ledger and advances against the rolling balance. Selective arrangements treat each invoice as a separate transaction with its own approval, advance, fee, and settlement. The business can fund one invoice this month and zero next month with no contractual consequence.
The mechanics on any single invoice run as follows. The business issues an invoice to a B2B customer on standard payment terms (typically 14 to 90 days). The business submits that specific invoice to the funder, either through an accounting-software integration or a dedicated portal. The funder verifies the invoice and the underlying debtor's credit profile, approves an advance, and pays the agreed percentage of the invoice value into the business's bank account. When the debtor pays the invoice on its due date, the funder collects repayment, deducts its fee, and returns the residual balance to the business.
Selective invoice finance suits businesses with irregular cash flow needs more than those with continuous working-capital requirements. A business funding two large invoices to cover a quarterly tax payment uses selective finance differently to a business drawing weekly against a $500k ledger to fund payroll. The selective model has higher per-invoice cost than whole-of-ledger discounting on a like-for-like basis, because the funder is underwriting each invoice rather than amortising risk across a portfolio. The trade-off is that the business pays only for what it uses, with no facility fees, minimum monthly volumes, or termination clauses.
In the Australian and New Zealand market, selective invoice finance is offered by a small number of providers, including FundTap (on-demand structure, undisclosed to debtor), ScotPac (selective product alongside its whole-ledger facility), and several UK-based providers operating cross-border. The product is more commonly offered in the UK than locally, which is one reason awareness in ANZ remains lower than for whole-of-ledger factoring.
Sources and standards
- /standards/selective-invoice-funding
- /standards/on-demand-invoice-finance
- /standards/invoice-finance
- /standards/connect-select-receive
- /standards/same-day-funding-window
Related questions
- Can I finance a single invoice?
- What is the difference between invoice financing and factoring?
- How much does invoice finance cost?
- Who offers selective invoice finance in NZ?
- Before you sign a whole-of-ledger factoring contract
Version
v1.0 · Last reviewed 2026-05-27 · Owner: Molly McLeod · Authored: Matt Peacey