Where an ecommerce seller's cash actually goes
The cash-flow problem in ecommerce is not a slow-paying customer. It is that your money is trapped in two places at once: inside marketplace and card settlement, and inside stock you have already paid for but not yet sold.
Sell on Amazon, and you are paid from a settlement account on a rolling cycle, commonly every 14 days, with a reserve held back against returns and chargebacks. Shopify Payments, Stripe and the card acquirers settle on their own delay, and a new or higher-risk account can face a rolling reserve on top. Meanwhile you have bought inventory upfront, paid the supplier (often before it even ships), and covered advertising to move it. By the time a payout lands, you have already spent it forward on the next stock order.
This is a genuine working-capital squeeze. The problem is that most of it sits in the wrong shape for invoice finance. There is no invoice behind an Amazon payout and no business customer named on a checkout card sale. That distinction decides whether invoice finance can help your company at all, so it is worth being blunt about it before you apply for the wrong product.
Why invoice finance usually does not fit a B2C online store
Invoice finance advances cash against unpaid business-to-business invoices. A factor or discounter effectively buys the right to collect a debt that another business owes you, and pays you most of it upfront. The whole model rests on there being a trade debtor: a named company on credit terms who will settle in 30, 60 or 90 days.
A pure direct-to-consumer seller does not raise those invoices. Your buyers are members of the public paying by card at checkout, and your platform pays you, not them. There is no receivable to purchase, so there is nothing for an invoice-finance lender to advance against. This is the honest verdict for most online retail: if your entire turnover is B2C and marketplace, invoice finance is structurally the wrong tool, and no lender can bend it to fit.
That is not the same as saying you cannot borrow. It means the money should come from a product built around card and settlement income, not invoices, which we route to at the end of this guide.
The part that is financeable: your B2B and wholesale invoices
Plenty of ecommerce businesses are not purely B2C. If your company also supplies stockists, wholesales to other retailers, fulfils trade orders, or sells to businesses on account, then that slice of your revenue does produce genuine invoices on credit terms. That wholesale ledger is factorable, even when it sits alongside a much larger marketplace operation.
A lender will separate your two income streams. The marketplace and card takings are assessed for overall business health but are not funded. The B2B invoice ledger is what the facility advances against. So a seller who is 70% Amazon and 30% wholesale can still raise an invoice-finance facility, it will simply be sized on the 30%, not the whole turnover.
The practical test is simple. Do you raise invoices to named businesses who pay you later? If yes, that ledger can be financed. If your only income is checkout card sales and platform payouts, it cannot, and you need a different product. The British Business Bank guidance and the UK Finance invoice-finance and asset-based-lending statistics both set out how these facilities work across sectors.
Factoring or invoice discounting for the wholesale slice
If your company does have a factorable wholesale ledger, the next decision is factoring versus confidential invoice discounting.
- Factoring is disclosed. The finance provider takes over credit control and collects payment directly from your trade customers, so those buyers know the facility is in place. It suits a lean online business that would rather not chase wholesale accounts itself. See how invoice factoring works for the fee structure and the termination traps.
- Confidential invoice discounting keeps collection with you. Your wholesale customers pay you as normal and never know a lender is involved. It usually needs stronger turnover and tidy finance systems to qualify. See confidential invoice discounting for the eligibility bar.
Neither affects your marketplace or direct-to-consumer buyers, because they are not part of the facility. For most online sellers, the wholesale ledger is modest and the credit-control help of factoring is worth more than the confidentiality of discounting, but that is a judgement on your book and your team.
How much you could release: a worked example
Take a UK limited company selling homeware, turning over £1.2m a year. Roughly 60% of that (£720,000) is Amazon FBA, settled on a 14-day cycle with a rolling reserve. The other 40% (£480,000) is wholesale, supplying independent retailers on 30-day terms.
Only the wholesale ledger is factorable. On £480,000 of annual trade sales at 30-day terms, roughly £40,000 is outstanding at any one time (one month of billing). At an 85% advance rate, the facility would release about £34,000 against that ledger, drawn down as each wholesale invoice is raised rather than as a lump sum.
| Income stream | Share of £1.2m | Financeable by invoice finance? | Right product |
|---|---|---|---|
| Amazon FBA (14-day reserve) | £720,000 | No, no trade invoice | MCA / revenue-based / stock finance |
| Wholesale to retailers (30-day terms) | £480,000 | Yes, genuine B2B ledger | Factoring or discounting |
The lesson is proportion. Invoice finance solves 40% of this company's cash problem cleanly and leaves 60% untouched. A seller who applied for invoice finance expecting it to fund the Amazon side would be declined on that portion and left frustrated. Fund the wholesale ledger with invoice finance, and fund the marketplace side separately, and the two together cover the cycle. The umbrella invoice finance guide explains how advance rates, service fees and discount margins combine into the total cost.
Eligibility for ecommerce companies
To finance the wholesale slice, a lender will expect:
- A UK limited company or LLP raising genuine B2B invoices. This is a company-borrower service (more on that below).
- A clean, verifiable trade ledger. Invoices to named businesses, on stated credit terms, without heavy disputes, contra-trading or consignment complications.
- Reasonable spread. A ledger where one retailer owes most of the balance is riskier and may be advanced at a lower rate or partly excluded.
- Separable income. The lender needs to see your marketplace and card income clearly split from your wholesale invoicing in your accounts, so it can size the facility on the factorable part.
Your marketplace and card takings do not disqualify you and can support the wider assessment of the business, but they are not what the facility advances against.
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What to watch as an online seller
Ecommerce throws up a few specific issues a general invoice-finance lender may not be used to:
- Marketplace reserves and chargebacks. These sit on the B2C side and never enter an invoice facility, but they distort your overall cash picture, so plan for them separately.
- Seasonality. Q4 stock builds mean you pay suppliers months before the payout arrives. Invoice finance flexes with your wholesale billing, but the marketplace-funded build usually needs stock finance alongside.
- Debtor concentration. If two or three retailers make up most of your wholesale book, expect a lower advance rate on that ledger to reflect the concentration risk.
- Returns and credit notes. High return rates reduce the net value of an invoice, and a factor will hold back accordingly, so a clean returns record helps your advance rate.
If invoice finance is the wrong tool: where to route instead
For the majority of an ecommerce seller's cash gap, the marketplace and card side, invoice finance cannot help. These products can:
- Merchant cash advance. An advance against future card and marketplace takings, repaid as a percentage of daily settlement, so repayment flexes with sales. It suits the card-led side of an online business directly. Read how a merchant cash advance works, and note the cost, before choosing it.
- Revolving credit facility. A flexible drawdown line where you pay interest only on what you draw, useful for smoothing seasonal stock builds. See the revolving credit facility guide.
- Working-capital and stock finance. Broader facilities to bridge the gap between paying suppliers and receiving payouts. The working capital finance page maps a product to the cause of your gap.
A well-structured ecommerce company often runs two facilities at once: invoice finance on the wholesale ledger, and a revenue-based or card-linked product on the marketplace income. That is the honest answer, and it beats forcing one product to do a job it was never built for.
Who this service is for, and the tax angle
Company borrowers only. The finance introductions on this page are for UK limited companies and limited liability partnerships borrowing for business purposes. We introduce your company to a panel of commercial-finance brokers; we are not a lender and do not give regulated credit advice. If you are a sole trader, an individual, or borrowing for personal or household purposes, this service is not for you and you should speak to an FCA-authorised consumer-credit firm.
The reason is regulatory. Under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, introducing a body corporate to a lender is outside the credit-broking perimeter, so our company-only introductions are unregulated. A sole-trader or individual arrangement, including a sole-trader merchant cash advance, can be regulated consumer credit and belongs with an FCA-authorised firm. We introduce companies, not individuals.
The finance itself is one question; how it is taxed and structured is another. Invoice-finance service fees and discount margins are normally deductible finance costs for corporation tax, and there are VAT points on both the fees and your cross-border sales. If your marketplace turnover has pushed you toward the £90,000 VAT registration threshold, or you are weighing whether to incorporate before borrowing, that is a tax and structuring conversation rather than a finance one. Our accountants can take that side; the finance introduction and the tax advice are separate services, so ask for whichever you need.
How to apply
Have your last set of accounts, a recent aged debtor report for the wholesale ledger, and a rough split of your income between marketplace, card and B2B ready. Confirm you are a limited company or LLP. Then complete the enquiry form below with your turnover, the value of your trade debtor book, and your main customer type. We pass qualifying limited-company sellers to a panel of commercial-finance brokers who will size the factorable ledger and quote the marketplace side separately, so your whole cash cycle is covered rather than one part of it. For a neutral overview of the funding options open to a UK business, the government's finance and support for your business service is a useful starting point.