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.
On paper, everything looks fine. You are busy, you are profitable, and your order book is full. In day-to-day operations, though, there is a serious gap between when you pay for materials and labour and when your customers settle their invoices. That 60-day cash gap can slow production, increase the pressure on supplier relationships, and make it harder to take on new work.
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. The British Business Bank notes that invoice finance can provide an advance of 80-90% of the value of unpaid invoices, with the remaining amount released once the customer pays.[1] For manufacturers, that can be the difference between running at full speed and running into a wall.
In this article, we will look at why the 60-day cash gap appears, why traditional finance tools often struggle to fix it, and how invoice finance can support your manufacturing operation.
The 60-Day Cash Gap in Manufacturing
Payment terms in many supply chains have stretched in recent years. Evidence from UK business credit reports suggests that 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.[2] Manufacturers often feel that pressure from both sides. Suppliers still expect payment in 30 days, but customers want more time.
To see what that looks like, 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 or lead to reduced credit limits.
- Production managers start delaying runs or scaling back material orders when cash is tight.
- Finance teams spend more time juggling payments, delaying non-essential spend, and worrying about payroll.
The British Business Bank has highlighted slow customer payments as a common cause of working capital problems for growing firms, especially when sales are rising faster than available cash.[1] In manufacturing, where upfront costs are high and margins can be tight, the impact of that gap is even more visible.
Why Traditional Finance Often Falls Short
When cash runs short, manufacturers typically reach for familiar tools: bank loans, overdrafts, or shareholder funding. Each has its place, but none was really designed to track a rolling 60-day gap that expands and contracts with your invoices.
Bank loans
Term loans are useful for buying machinery or expanding a factory. They are less helpful for day-to-day cash flow. Approval usually takes time, often several weeks, and requires detailed forecasts and security. Once approved, the loan amount is fixed. If your sales grow and your working capital gap grows with them, you may quickly hit the limit and need to negotiate again.
For more, see our guide Invoice Finance vs Bank Loans for Manufacturers: Which Is Right for You?
Overdrafts
Overdrafts give some flexibility, but they can be expensive and unpredictable. Interest rates are often higher than those on secured loans, and banks can review or reduce limits at short notice. A manufacturer that sits close to its overdraft limit month after month may not be comfortable relying on that as the main safety net.
Director or shareholder funding
Owner funding can work in the short term. Over time, it concentrates risk on a small group of people and ties up personal capital that could be used elsewhere. It also does not scale well beyond a certain point.
What all of these options have in common is that they are not directly linked to the value of the invoices you have already raised. They sit beside your operations rather than keeping pace with them. Invoice finance takes a different approach, anchoring funding to the debtor’s books.
How Invoice Finance Helps Close the 60-Day Gap
Invoice finance lets you convert approved invoices into cash soon after issuing them, rather than waiting for customers to pay in full. UK Finance describes invoice finance and asset-based lending as ways for businesses to unlock working capital tied up in unpaid invoices and other assets, often at high advance rates.[3]
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, usually through a portal or agreed file feed.
- The provider advances a large share of the invoice value, for example, 85%, often within a few days of submission, once the facility is set up.[1][3]
- 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. If turnover falls, the facility naturally scales down.
Some lenders focus strictly on receivables, while others offer broader asset-based lending that can also include inventory and plant as part of the security package.[3][4] Which route makes sense depends on your mix of assets and your appetite for using them to support larger facilities.
If you want to understand the mechanics in more detail, it’s worth reviewing how invoice finance works step-by-step.
How Manufacturers Benefit in Practice
The headline benefit of invoice finance is straightforward: it brings cash in sooner. For manufacturers, that simple change has several knock-on effects.
Keeping production moving
When working capital is tight, production decisions often shift from demand to cash. You might hold back on buying certain materials, delay a production run, or choose not to accept a rush order because there is no margin for error. 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. That makes it easier to plan production around capacity and demand, not just bank balances.
Looking after supplier relationships
Suppliers form the backbone of any manufacturing operation. Paying them on time or taking advantage of early-payment discounts when offered strengthens those relationships and often improves pricing. A stable cash flow position gives you more confidence to honour agreed terms and negotiate from a position of strength, rather than constantly asking for extensions.
Managing payroll and overheads
Wage runs, rent, and energy bills are fixed commitments. If customer payments drift further out, those commitments do not move with them. Invoice finance can give you more control over timing by allowing you to turn part of your sales ledger into immediate cash. Instead of waiting for a customer’s finance department to work through a backlog, you can cover those core costs and keep your team focused on delivery.
Supporting growth decisions
Growth often creates the biggest strain on working capital. New orders look attractive, but they also tie up more cash in work-in-progress and finished goods while you wait for payment. A facility that increases as your invoiced sales increase reduces that friction. It is easier to accept a large order from a major buyer if you know you can draw against the invoice to cover the cost of fulfilling it.
Common Misconceptions in Manufacturing
There are some recurring concerns about invoice finance that come up in manufacturing conversations. They are understandable, but they do not always reflect how modern facilities actually work.
“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.[1] When manufacturers compare options, they often set those costs against the price of using overdrafts, missing early payment discounts, or turning down orders because they cannot fund them. In many cases, the net position is favourable once those factors are taken into account.
“Will customers think we have a problem?”
With traditional factoring, customers pay the finance provider directly and may interact with that provider’s collections team. The use of invoice finance is therefore visible. In many sectors, this is now considered normal rather than a sign of distress, although perceptions can differ by market.[3] Manufacturers that prefer to keep funding arrangements in the background can look at confidential invoice finance, where the business keeps control of collections and customers continue to pay in the usual way.
“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. UK Finance reports that these forms of funding are an important part of the commercial finance landscape, particularly for firms that sell on credit terms and maintain significant receivables.[3] For many manufacturers, invoice finance is less about crisis management and more about smoothing cash flow in a sector where long payment terms are standard. It’s also worth understanding the potential risks of invoice finance so you can make an informed decision.
Is Invoice Finance a Fit for Your Manufacturing Business?
Invoice finance will not suit every situation. 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 from customers.
- Has meaningful amounts tied up in unpaid invoices at any given time.
- Deals with customers that are generally creditworthy, even if they are slow to pay.
- Wants to support growth or stabilise cash flow without relying solely on overdrafts or personal funds.
If that sounds like your operation, it may be worth looking more closely at how a facility could be structured. The British Business Bank suggests that invoice finance is particularly relevant for firms with strong order books but constrained working capital.[1][5] That description fits many manufacturers facing 60-day terms and rising input costs. You can also explore broader cash flow management strategies to see how invoice finance fits within your overall funding mix.
FAQs: Invoice Finance and the 60-Day Cash Gap
What exactly do people mean by a 60-day cash gap?
In this context, the 60-day cash gap is the period between your main cash outflows and your main cash inflows. You may pay suppliers and staff within 30 days, but customers pay you in 60 or 90 days. The gap is the difference between the two timings, and it has to be funded from somewhere.
How does invoice finance change that timing?
With invoice finance, you can draw down most of the value of an approved invoice shortly after you issue it, rather than waiting until the official due date. That means part of the cash that would normally arrive in two or three months is available within a few days, which you can use to cover costs linked to that work.[1][3]
Will my customers notice that I am using invoice finance?
They may, depending on the structure. In a factoring arrangement, customers usually pay the finance provider, so they see a different name on payment instructions. With confidential invoice discounting, customers still pay you (or a controlled account in your name), and the finance runs in the background.[1][3]
Can invoice finance be used alongside existing loans or asset finance?
Yes. Many manufacturers run several facilities at once, for example, a term loan for machinery, a hire purchase agreement for vehicles, and an invoice finance facility for working capital. As with any mix of funding, it is important to understand how the agreements interact and what security has been granted, but they are not mutually exclusive.
What happens if a customer does not pay their invoice?
Providers assess customer creditworthiness when setting up the facility and may set limits for individual buyers. Most standard facilities are recourse-based, meaning your business ultimately stands behind the debt, though some offer bad-debt protection or non-recourse structures for an additional cost.[1][3] It is worth asking detailed questions about how different scenarios would be handled.
Next Steps: Explore Invoice Finance for Your Manufacturing Business
The 60-day cash gap is a structural feature of many supply chains, not a reflection of how well you run your business. You are asked to carry the cost of production for much longer than your own suppliers are willing to wait, and traditional funding tools do not always align neatly with that reality.
Invoice finance gives manufacturers a way to pull forward the cash locked in unpaid invoices so they can pay suppliers on time, keep production lines busy, and say yes to the next opportunity with more confidence. If you want to see how that could look in your own numbers, a good next step is to review the dedicated Invoice Finance for Manufacturers page and then speak to InvoiceWise about comparing offers from multiple FCA-regulated providers in one place.
References
[1] British Business Bank. (n.d.). Invoice finance – Business guidance. Retrieved 2026, from https://www.british-business-bank.co.uk/business-guidance/guidance-articles/finance/invoice-finance/
[2] Credit Connect. (n.d.). Companies offering 60-day payment terms have doubled since 2020. Retrieved 2026, from https://www.credit-connect.co.uk/news/commercial-credit-management/companies-offering-60-day-payment-terms-has-doubled-since-2020/
[3] UK Finance. (n.d.). Invoice finance and asset-based lending. Retrieved 2026, from https://www.ukfinance.org.uk/our-expertise/commercial-finance/invoice-finance-and-asset-based-lending
[4] Santander UK. (n.d.). Invoice finance & asset based lending. Retrieved 2026, from https://www.santander.co.uk/corporate/solutions/finance/invoice-finance-asset-based-lending
[5] British Business Bank. (n.d.). Debt finance for innovative businesses. Retrieved 2026, from https://www.british-business-bank.co.uk/business-guidance/guidance-articles/finance/debt-finance-for-innovative-businesses
