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Invoice finance is a way for businesses to fund cash flow by selling their invoices to a third party (a factor, or factoring company) at a discount. Invoice finance/factoring can be provided by independent finance providers, or by banks. An asset-based working capital solution that allows businesses to get advances on cash they are due from customers, rather than waiting for those customers to pay. Businesses can then invest in growth. It is also known with various terms such as Debt factoring, Bill Discounting, Invoice finance and Asset based lending.
How does it work?
The business client enters into an agreement with the factoring company/bank/finance provider whereby the company will manage their sales ledger and credit control on an ongoing basis for a fixed period (the term of the factoring contract, typically 24 months). 
In return, the bank or finance provider advances some funds upfront when the business client sends an invoice to a customer- typically 70-85%.
When the end customer comes to pay, the bank or finance provider collects the 100% debt from the customer and makes the remaining balance available to the business client, minus their interest and fees. The Interest rate depends on the country to country. In Most cases the factoring company/bank/finance provider undertake a collateral from the businesses in order to safe guard against any defaults by the customers in paying for the invoices within time.
Advantages of Invoice Finance
For a fee, bank or finance provider can unlock funds tied up in unpaid invoices so that your business receives funds without waiting for customers to pay.
This makes cash flow management easier for the businesses that use Invoice financing. The Company gets funded immediately from the factoring company/bank/finance provider, and need not wait for credit period provide for the customer to end in order to replenish their cash flows. 
In particular, invoice financing helps companies, especially Small and Medium Enterprises (SMEs), that have cash flow problems because of late payments from customers (i.e., invoices are usually paid in 30–90 days).

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