Key takeaways
- Invoice financing and factoring both get you cash before your customer pays. The names are used loosely, so always ask which structure is on offer.
- "With recourse" generally means you carry the risk if your customer does not pay. "Non-recourse" cover usually comes with conditions, such as the goods or services having been delivered in good order. [23] LEGAL REVIEW
- You receive less than the invoice value. Compare the total cost in dollars, and as an effective annual rate, not a headline percentage.
- Under the government-supported EFS Trade Loan, factoring with recourse and accounts receivable discounting can be supported through participating lenders. You still repay 100%. [3]
Key facts
- EnterpriseSG's EFS Trade Loan supports uses including factoring with recourse and receivables discounting, for up to 1 year. [3]
Key terms
- Invoice financing
- A way to get cash before business customers pay their invoices: a financier advances part of the value of unpaid invoices now, and the advance plus interest is repaid when the customer pays. [22] In the glossary
- Factoring
- A way to get cash for unpaid invoices by selling or assigning them to a provider, which often collects payment from your customer itself. Providers do not always use the term the same way. [23] In the glossary
- Recourse
- In invoice financing or factoring, with recourse means you are still responsible for repaying the provider if your customer does not pay. [23] In the glossary
- Non-recourse
- An arrangement where the invoice finance provider takes on the risk that your customer cannot pay, usually only under set conditions, such as goods delivered in good order. [23] LEGAL REVIEW In the glossary
What is invoice financing?
Invoice financing is a way to get cash before your business customers pay their invoices. When you deliver goods or services to another business, you usually send an invoice and wait 30, 60 or 90 days to be paid. Meanwhile, wages, rent and suppliers still need paying. Invoice financing closes that gap: a financier advances you part of the value of unpaid invoices now, and you settle the financing when your customer pays.
Bank product pages in Singapore describe this in similar terms: an advance on unpaid invoices before your buyer pays, with the financing amount plus interest repaid to the bank later. [22] Some providers only offer it to businesses that already have a credit facility with them. [22]
Invoice financing vs factoring: what's the difference?
The two terms overlap, and providers do not always use them the same way. As a rough guide:
| Invoice financing (discounting) | Factoring | |
|---|---|---|
| What happens to the invoice | You borrow against it; the invoice is usually pledged or assigned as security | You sell or assign the invoice to the provider |
| Who collects from your customer | Usually you | Often the provider |
| Is your customer told | Not always | Usually, but not always |
| Typical name on bank pages | Invoice financing, invoice discounting | Factoring, accounts receivable purchase |
This table describes common patterns, not rules. How each product works, including whether your customer is told, varies by provider, so ask the provider. For example, one bank's accounts receivable purchase product includes the bank collecting payments from your customers for you. [23] Read the actual terms of any offer.
How does invoice financing work?
- You deliver the goods or service and issue an invoice to a business customer.
- You submit the invoice and supporting trade documents to the provider. [22]
- The provider advances part of the invoice value to you.
- Your customer pays on the due date, either to you or straight to the provider.
- The advance plus interest and fees is settled, and any balance held back is released to you.
Recourse and non-recourse
This is the most important term to understand.
With recourse means that if your customer does not pay, you are still responsible for repaying the provider. One bank explains that under recourse, if your customers do not pay after you have delivered in good order, it will seek repayment from you for invoices it has financed. [23] Under the EFS Trade Loan, EnterpriseSG lists factoring with recourse among the supported uses. [3] See the EFS loan types.
Non-recourse means the provider takes on the risk that your customer cannot pay, but usually only under set conditions. For example, the same bank describes non-recourse cover as applying where goods or services were delivered in good order, and says that if a buyer does not pay, the waiting period before it pays out is usually 90 to 180 days after the due date. [23] Disputes over quality, short delivery or credit notes are therefore likely to stay your problem. LEGAL REVIEW
Pricing can differ between recourse and non-recourse, so ask the provider how it prices each.
What it costs
Costs are usually made up of several parts:
- Interest or a discount charge on the amount advanced, for the time it is outstanding. [22]
- Fees, such as processing, service or administration fees. MoneySense lists processing, cancellation, late payment and early repayment fees among the charges to ask about on any loan. [10]
- Early repayment fees. One bank's invoice financing page says prepayment is subject to a fee. [22]
- The held-back balance. You may not get the full invoice value until your customer pays.
Here is a simple illustration. It is made up to show the arithmetic, and the figures are not market rates. You have a S$50,000 invoice due in 60 days. A provider advances 80%, so you receive S$40,000 now. Suppose all interest and fees come to S$800. When your customer pays, the provider keeps S$40,800 and releases the remaining S$9,200 to you. You received S$49,200 in total for a S$50,000 invoice.
S$800 on S$40,000 for 60 days is 2% for two months. Over a year, that is roughly 12.2% on a simple basis (2% x 365 / 60), or about 12.8% if compounded. Converting a cost into an annual rate like this helps you compare it with a loan. See our guide on flat rate vs effective interest rate.
When is invoice financing worth considering?
- Customers pay on long terms, but your own costs are due sooner.
- Sales are growing faster than cash coming in.
- Your customers are businesses that pay reliably. Providers may look at your customers as well as at you: for example, one bank says the quality of the receivables is also assessed. [23]
It is generally not useful for cash sales to consumers, because there are no business invoices to finance.
What providers usually ask for
- The invoices and supporting trade documents, such as proof of delivery. [22][23]
- Some providers may also ask for details of your customers or your sales records. What they ask for varies, so ask the provider what it needs.
- Your usual business documents. See preparing to apply.
What to check before you agree
- What is the total cost in dollars for a typical invoice, including every fee?
- Is it with recourse or non-recourse? Exactly when would I have to repay if my customer does not pay?
- Will my customer be told, and who collects the payment?
- What happens if my customer disputes an invoice or issues a credit note?
- Is there a minimum volume, a lock-in period, or a fee to stop or repay early?
- Do I need to give a personal guarantee or other security?
- Is the provider regulated? Banks and finance companies can be checked on the MAS Financial Institutions Directory. [16]
- Has anyone asked me to pay a fee before money is released? Treat this as a warning sign. [12]
Frequently asked questions
What is invoice financing?
Invoice financing is a way to get cash before your business customers pay their invoices. A financier advances you part of the value of unpaid invoices now, and you settle the financing, plus interest and fees, when your customer pays.
Source: [22]
What is the difference between invoice financing and factoring?
With invoice financing you usually borrow against the invoice and collect from your customer yourself. With factoring you sell or assign the invoice to the provider, which often collects the payment. Providers do not always use the terms the same way, so read the actual terms.
Source: [23]
Is invoice financing the same as receivables financing?
The terms overlap. Bank pages in Singapore use names such as invoice financing, invoice discounting, factoring and accounts receivable purchase for related products, and EnterpriseSG's EFS Trade Loan refers to receivables discounting. Ask each provider how its product works.
Is invoice financing a good idea for my business?
It can help when customers pay on long terms but your own costs are due sooner, or when sales grow faster than cash comes in. It is generally not useful for cash sales to consumers, and it has costs: interest or a discount charge, fees, and a held-back balance until your customer pays.
Does the EFS cover factoring?
EnterpriseSG lists factoring with recourse and accounts receivable discounting among the uses of the EFS Trade Loan, for up to 1 year, through participating lenders. You still repay 100%.
Source: [3]
Disclaimer. This guide gives general information only. It is not financial, legal or tax advice, and it is not a recommendation of any product or provider. Riverell is not a lender and does not arrange loans. Figures and scheme details were checked against the sources listed on 25 Oct 2026 and can change. Always confirm terms directly with the provider, and get independent professional advice if you are unsure. LEGAL REVIEW
Sources
- [3]EnterpriseSG - EFS Trade Loan. https://www.enterprisesg.gov.sg/financial-support/enterprise-financing-scheme---trade-loan (accessed 25 Oct 2026)
- [10]MAS MoneySense - Costs of borrowing: flat rate, monthly rest and effective interest rate (last updated 22 Apr 2026). https://www.moneysense.gov.sg/costs-of-borrowing-flat-rate-monthly-rest-and-effective-interest-rate/ (accessed 25 Oct 2026)
- [12]ScamShield - Loan scams (updated 28 May 2026). https://www.scamshield.gov.sg/i-want-protection-from-scams/learn-to-recognise-scams/loan-scams/ (accessed 25 Oct 2026)
- [16]MAS - Financial Institutions Directory. https://eservices.mas.gov.sg/fid (accessed 25 Oct 2026)
- [22]DBS - Sales Invoice Financing (product description only). https://www.dbs.com.sg/sme/trade/export-services/sales-invoice-financing (accessed 25 Oct 2026)
- [23]DBS - Accounts Receivable Purchase (product description only). https://www.dbs.com.sg/sme/trade/export-services/accounts-receivable-purchasing (accessed 25 Oct 2026)