Updated 31st July 2023

Invoice finance and trust receipts are two effective financial instruments to help businesses cover gaps in working capital and fund opportunities to grow.

There are many ways in which the ScotPac team can assist you and your business in accessing the working capital you need, and in this article we’ll outline two of those: invoice finance and trust receipts.

As always, each financial solution has its own advantages and disadvantages. So, it’s important that you understand the differences when considering which one is more suitable for your business’s situation.

Invoice Finance: what is it?

Invoice finance is an efficient and effective way for businesses to access capital quickly. Your company can leverage invoices it has issued to customers/clients that remain unpaid as collateral for an upfront line of credit.

Instead of having to wait for the invoices to settle, which could take up to 30 days according to a standard’s invoice terms, invoice finance offers access to capital almost immediately.

How does invoice finance work?

The business receiving the funding retains ownership of the invoices and, accordingly, any associated accounts receivable. The finance provider, such as ScotPac, will provide a line of creditamount based on the total value of the outstanding invoices. Most commonly, a processing fee (calculated as a percentage of the loan amount) is charged. Other than that, invoice finance generally allows you to access the full amount owed to your business.

This working capital solution requires far less paperwork and hassle than traditional bank loans and as a result is far quicker. That’s why businesses needing swift access to capital to cover a gap in cash flow or to utilise a unique growth opportunity often opt for invoice finance. 

In terms of eligibility, the main criteria is having dependable customers who consistently and reliably settle their unpaid invoices on time as well as in full.

How do you get Invoice Finance?

In summary, once you have raised and issued the invoices to your customers for goods/services provided, those invoices are then supplied to the financing company as well.

You’ll then receive the pre-agreed percentage value of the total amount of unpaid invoices with the rest provided once the invoices are settled and your lender repaid. (Less of course the agreed upon fees associated with the funding.)

Why Should You Use Invoice Finance?

Invoice finance can be an enormously helpful way for businesses to thrive and grow, but it may not be for everyone.


1. Quick access to working capital.
2. Less red tape and paper work compared to traditional loans.
3. Fewer eligibility criteria and no need for high credit scores.
4. Flexible in application and use.
5. Ideally structured for businesses of all sizes, including start-ups and fast scaling companies.


1. Fees can be relatively expensive when compared to some other alternative solutions.
2. Businesses’ eligibility depends on the reliability of their customers.
3. The business will still be responsible for accounts receivable as they retain ownership of the invoices.

Trust Receipt: what is it?

Trust receipts, also called trust account receipts, is a financial solution that can be utilised once a business receives goods or services but wants to defer payment until either the inventory acquired is sold or the asset purchased begins generating revenue.

In this way, a trust receipt can be an invaluable tool in helping businesses maintain cash flow when their capital is tied up elsewhere without it negatively impacting on their day to day operations.

How does a Trust Receipt work?

To put it simply, a financial institution will issue a trust receipt attesting to their ownership of the purchased and delivered goods or assets.

The business itself is allowed to maintain their hold on the item(s) and utilsie it for their business. Once sold or used to generate revenue, the business then repays the loan amount to the financial institution. 

In the event that the loan cannot or is not paid back, non-compliance with the trust receipt’s terms could result in the financial institution retaining ownership of the item(s) and revoking the business’s hold and use of it.

Is a Trust Receipt a form of letter of credit finance?

A trust receipt is a form of letter of credit financing, though with a key distinct difference: ownership.


The trust receipt will outline that the finance provider retains ownership of the purchased goods or asset, whereas a letter of credit offers guarantee that payment will be made on time and in full.

Promissory note

A trust receipt works more similarly to a promissory note as it outlines that the amount loaned for the purchasing of a good will be repaid. In this case, as with a promissory note, it is the financial institution paying the supplier/seller and thus they are the owners of the item(s) purchased.

The business receiving the trust receipt can engage with and use the goods/asset but does not own it and therefore is not required to put up security for the loan.


If the business fails to uphold the terms of the contract, the goods/asset will remain as property of the financial institution and the ongoing agreement subject to termination as a result of the violation. 

Why Should You Use a Trust Receipt?

As with Invoice Finance, this instrument offers many advantages and some disadvantages a business should consider.


1. Businesses can invest in goods or assets upfront even without the necessary cash flow.
2. With a financial institution providing upfront payment, working capital can be allocated elsewhere and maximised.
3. A trust receipt is inherently flexible and can be used, with agreement, to complement a business’s operations and cash flow needs.


1. The finance provider retains ownership of the item(s) which – in an instance of non-compliance – can mean that full ownership is retained and thus disruption to the business. 
2. Not all businesses experiencing cash flow problems can utilise a trust receipt limiting its applicability across the board.

Ready to grow your business? Talk to a ScotPac expert to discover how you can access working capital today!

Every business requires custom financial advice and a bespoke financial solution to suit their needs. Whether you’re simply after a solution to smooth out some cash flow issues or want to grab growth opportunities in front of you with both hands, our lending specialists are here to help.Whether invoice finance or a trust receipt is right for you, reach out to our team today for a no pressure consultation with one of our professional and experienced specialists. Contact us today!