Invoice Financing for Home Service Pros

Brittany Foster

Articles /
Invoice Financing for Small Business

Originally published in November 2021. Last updated on June 3, 2025.

In an ideal world, customers would pay their bills on time and in full every time, but for many service business owners, that’s not always the case.

Unpaid invoices, like the ones sitting in your accounts receivable, reduce cash flow, making it harder to pay employees and cover expenses.

That’s where invoice financing comes in handy. Keep reading to learn how to free up the cash tied to outstanding invoices, so you can keep things running smoothly without waiting on slow customers to pay your bills.

What is invoice financing?

Invoice financing is when you take out a cash advance from a third-party lender or financing company using the amount owing on unpaid customer invoices in accounts receivable.

You can use the money to address cash flow problems and cover overhead costs and operating expenses while waiting for a customer to pay their bill.

It’s a good option if you need fast access to funds because your customers are refusing to pay, have only made a partial payment, or have an overdue invoice.

Invoice financing vs invoice factoring

Invoice financing is when you borrow against your unpaid invoices. Invoice factoring is when you sell your unpaid customer invoices outright to an invoice factoring company.

For example, with an invoice financing option, you get a cash advance but remain the point of contact for the customer and are responsible for collecting payment yourself.

With invoice factoring, the invoice factoring company purchases the customer’s outstanding invoice from you for 80-90% of the total due and takes over managing the relationship and collecting the debt.

Invoice factoring is typically used for service providers:

With slow-paying or high-risk clients
Who need immediate cash flow and aren’t certain when a client will pay
Who prefer to outsource collections to a third-party

How does invoice financing work?

Invoice financing is provided by lenders like banks, online financing companies, and invoice factoring companies.

To get invoice financing, you’ll need to:

Create an account with an invoice financing provider.
Connect your accounting or business management software, or upload outstanding invoices to the platform.
Choose which invoices you want to finance.
Receive the advance, usually within one business day.
Repay the advance once your customer pays their invoice. Some lenders may also offer scheduled payments over 12-24 weeks, though it’s less common.
Once the advance is repaid, you’ll receive the remaining 10-20% of the invoice amount minus any applicable fees.

For example, say you have a $2000 invoice with net-30 payment terms, and invoice financing provides you with 85% of the balance upfront. That would be $1700 in your pocket right away.

The lender charges you 3% of the total invoice amount each month until the customer pays in full. Once the invoice is paid, the lender gives you the remainder of the invoice amount ($300) minus any fees.

So if the customer pays within 30 days, your fees would total $60, meaning on a $2000 invoice, you would receive a total of $1940.

Before choosing an invoice financing platform, make sure to review a few different ones to see which is the best option for your needs. Be sure to consider:

Any one-time fees
Monthly rates
How easy or complicated the application process is
When you need the money by
How much you would like to borrow

Then go with the lender that will provide you with the best deal so you can keep as much profit as possible while still getting what you need to cover your costs.

How much does invoice financing cost?

Most lenders will give you an advance of 80-90% of the invoice and charge you between 1-5% of the invoice amount per month until the balance has been repaid.

Some also charge additional fees, like setup fees, processing fees, or monthly minimums. The amount you pay will depend on the lender, the amount of the cash advance, and how long it takes you to pay them back.

So if you wanted a cash advance on a $1500 invoice, and the lender had a $25 setup fee and charged 2.5% a month, you’d get $1437.50 if the customer paid you within 30 days, or $1400 if they paid you within 60.

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Invoice financing examples

Invoice factoring rates and fees vary based on the lender you choose, eating into your profit margin on each invoice.

Make sure you understand how it can impact your bottom line before moving ahead by reviewing these examples.

1. Invoice financing example for lawn care

If you were to take a cash advance from an invoice financing lender for a small lawn care job, here’s how the numbers would break down:

Invoice amount: $500
Cash advance of 85%: $425
Remainder of invoice: $75
3% fee every 30 days: $15 per month

If the customer paid the invoice in 30 days, you would receive the remaining amount of the invoice ($75) less the fees you owed to the lender ($15).

So, on a $500 invoice, you would get a total of $485.

2. Invoice financing example for HVAC repair

An HVAC repair for a larger invoice and with a different lender might look more like this:

Invoice amount: $1200
Cash advance of 90%: $1080
Remainder of invoice: $120
2.5% fee every 30 days: $30 per month
Processing fee: $20

In this case, if the customer paid their invoice in full after 60 days, you would receive a total of $1120 on a $1200 invoice ($1200 less the $20 processing fee and $60 in fees for the 60-day payment term).

3. Invoice financing example for general contracting

For larger invoices, like those a general contractor might have, and with a shorter payment term of 15 days, invoice financers typically charge a prorated fee, which would look like this:

Invoice amount: $5000
Cash advance of 90%: $4500
Remainder of invoice: $500
1.5% fee every 30 days, prorated for 15: $37.50
One-time setup fee: $75

If your customer paid the invoice within 15 days of financing your invoice, you would only pay $37.50, as opposed to the full 30-day charge of $75.

That means that on a $5000 invoice, you would receive a total of $4887.50 after paying both a one-time setup fee and the 1.5% fee for 15 days.

Invoice financing pros and cons

Invoice financing has advantages and disadvantages, and whether you should try it depends on your situation and business.

Invoice financing pros

Invoice financing can help you to:

1. Address short-term cash flow problems

If you expect a client to pay on time, and they haven’t, it can throw a wrench into your business operations. Maybe you were relying on the funds to purchase materials for another job, or to pay a subcontractor, and now the late payment is causing delays and souring relationships.

Invoice financing can be an effective way to handle short-term cash flow issues because it allows you to borrow against your assets. That prevents you from having to apply for a small business loan or line of credit just to cover your expenses.

And it also helps avoid lengthy application and approval processes since it’s based on income you’re already expecting to receive.

READ MORE: How to improve cash flow

2. It doesn’t cause long-term debt

Invoice financing has a quick turnaround, meaning you don’t let the debt sit around and collect interest for long periods of time.

They require less commitment and less red tape than traditional loans, giving you a better option if you just need a cash advance to hold you over or cover an unexpected expense.

3. Clients aren’t notified

Unlike an invoice factoring company, invoice financing lenders don’t notify customers that you have borrowed against their unpaid invoice. Everything happens between you and the lender, meaning the customer will never know you were in a tight spot financially.

Invoice financing cons

Invoice financing has its downsides, such as:

1. It costs money

Offering an invoice financing option isn’t free. The fees you pay take away from the profit you get from each invoice you finance. If you aren’t charging enough markup, you may only break even or, worse, lose money.

Before financing an invoice, calculate how much it will cost you and compare it to your profit margin. If it looks like it will prevent you from making money or put you in debt, it’s probably not worth it.

FREE TOOL: Profit margin calculator

2. It only works if you have unpaid invoices

Unlike a line of credit or an SBA loan, invoice financing only works if you have unpaid invoices. If your cash flow problems are caused by something else, like unexpected expenses or startup costs, invoice financing won’t work for you.

3. It’s a short-term solution

Invoice financing is a short-term solution. If you constantly struggle to get clients to pay on time, financing invoices will only get you so far.

Instead, you may need to reevaluate your quoting, invoicing, and payment strategies to improve your chances of getting paid in full and on time. After all, invoice financing eats away at profit, so the more you use it, the more money you lose.

Invoice financing alternatives

Invoice financing isn’t a long-term solution for addressing late payments. Instead, you can be proactive by:

1. Asking for a deposit

Asking for upfront deposits ensures clients are financially invested in a project before it begins, helping you to vet quality clients early on. It also gives you the funds you need to buy materials and supplies, so you aren’t left covering costs out of pocket if there’s a last-minute cancellation.

2. Offering consumer financing

Consumer financing is when you use a third-party finance platform like Wisetack to offer clients the option to break up the cost of a job into smaller, more manageable invoice payments.

This reduces upfront costs, making it easier for clients to approve higher-priced jobs. It also helps customers who need emergency work done on a limited budget move forward with essential repairs.

Jobber’s Wisetack integration makes it easy for you to offer consumer financing right from your quotes. This gives customers the freedom to choose the best option for their budget while keeping your cash flow steady and predictable.

3. Making it easier for clients to pay

Your best bet for getting paid on time is to address the root of the problem by encouraging clients to pay you in full before their invoices are due. And while that may seem like a monumental task, software like Jobber can help.

You can use it to:

Create professional, branded invoices with clear payment terms
Send them to clients via email and text, and make them available to review in their self-serve portal
Automate overdue payment reminders
Process credit card, debit card, and ACH payments

The easier it is for clients to pay you, the more likely they are to clear up invoice payments before they’re due, keeping cash flow steady and predictable. That way, you can save invoice financing for emergency costs or unexpected gaps instead of relying on it to keep your business running day to day.