If you run a manufacturing business, you have probably lived through this scenario. A key customer places a large order and requests 60- or 90-day payment terms. You agree because the contract is too valuable to lose. A few days later, supplier invoices appear on 30-day terms, payroll is looming, and you realise that a lot of cash is going out long before any comes back in.
Invoice finance is built to address exactly this problem. Instead of waiting the full 60 or 90 days for payment, you can use your unpaid invoices to bring in a large share of the cash much earlier — often 80-90% of the value of unpaid invoices, with the remaining amount released once the customer pays.
The 60-Day Cash Gap in Manufacturing
Payment terms in many supply chains have stretched in recent years. The number of companies offering 60-day terms has roughly doubled since 2020, particularly among companies with large customers who have more bargaining power than their suppliers.
Imagine a manufacturer with an annual turnover of £4 million and average customer terms of 75 days. Each month, the business may spend £300,000 on raw materials, wages, subcontractors, and energy to produce goods that will not be paid for for more than two months. Profitability might be strong, yet hundreds of thousands of pounds are tied up in work already delivered.
That gap shows up in several ways: supplier accounts that edge past agreed terms can strain relationships, production managers start delaying runs or scaling back material orders when cash is tight, and finance teams spend more time juggling payments and worrying about payroll.
Why Traditional Finance Often Falls Short
Bank loans
Term loans are useful for buying machinery or expanding a factory, but less helpful for day-to-day cash flow. Approval usually takes several weeks and requires detailed forecasts and security. Once approved, the loan amount is fixed.
Overdrafts
Overdrafts give some flexibility, but they can be expensive and unpredictable. Interest rates are often higher than secured loans, and banks can review or reduce limits at short notice.
Director or shareholder funding
Owner funding can work in the short term, but over time it concentrates risk on a small group of people and ties up personal capital, and it does not scale well beyond a certain point.
How Invoice Finance Helps Close the 60-Day Gap
Here is how that can work for a manufacturer: you ship an order and raise an invoice on 60 or 75-day terms. You upload the invoice to an invoice finance provider. The provider advances a large share of the invoice value, for example 85%, often within a few days of submission. You use that cash to pay suppliers, wages, and overheads. When the customer pays the invoice, the provider sends you the remaining balance after deducting agreed-upon fees.
Because the facility is linked to your invoices, the funding available tends to grow in line with your sales. If you win a new contract and start billing more, your borrowing base rises without having to renegotiate a fixed loan.
How Manufacturers Benefit in Practice
Keeping production moving
When working capital is tight, production decisions often shift from demand to cash. With a facility in place, you can use advances against invoices to cover the cost of materials and labour, then recover the rest when customers pay.
Looking after supplier relationships
Paying suppliers on time or taking advantage of early-payment discounts strengthens relationships and often improves pricing. A stable cash flow position gives you more confidence to honour agreed terms.
Managing payroll and overheads
Wage runs, rent, and energy bills are fixed commitments that do not move if customer payments drift further out. Invoice finance can give you more control over timing.
Supporting growth decisions
A facility that increases as your invoiced sales increase reduces the friction of accepting a large order from a major buyer, since you know you can draw against the invoice to cover the cost of fulfilling it.
Common Misconceptions in Manufacturing
"Isn't it too expensive?"
Invoice finance incurs costs in the form of service and discount fees, but those fees vary widely by sector and risk profile. Manufacturers often set those costs against the price of using overdrafts, missing early payment discounts, or turning down orders because they cannot fund them.
"Will customers think we have a problem?"
With traditional factoring, customers pay the finance provider directly. In many sectors, this is now considered normal rather than a sign of distress. Manufacturers that prefer to keep funding arrangements in the background can look at confidential invoice finance, where the business keeps control of collections.
"Isn't this only for companies in financial trouble?"
Invoice finance and asset-based lending are widely used across the UK economy, including by profitable, growing businesses. For many manufacturers, it's less about crisis management and more about smoothing cash flow in a sector where long payment terms are standard.
Is Invoice Finance a Fit for Your Manufacturing Business?
It tends to work best where a manufacturer sells business to business on clear, documented credit terms; regularly faces payment terms of 30 days or longer; has meaningful amounts tied up in unpaid invoices; deals with customers that are generally creditworthy, even if slow to pay; and wants to support growth or stabilise cash flow without relying solely on overdrafts or personal funds.