2 min read
Why agencies face persistent cashflow pressure
An agency delivers work — campaigns, design, strategy, media buying — in one period and invoices for it shortly after. The client, often a larger corporate, then takes 30, 45 or 60 days to pay. Meanwhile the agency's largest cost, payroll, falls every month without exception.
For agencies with rapid growth or seasonal peaks — a new client win requiring immediate headcount, or a large campaign delivered in Q4 — the gap between cash out and cash in can strain even a profitable business. Profitability on paper does not prevent a payroll shortfall in practice.
Invoice discounting as a payroll bridge
Invoice discounting allows the agency to draw against the value of issued invoices immediately, receiving a percentage of the invoice face value — typically 70–90% — from the lender. When the client settles, the balance (minus the facility fee) is released. The arrangement is usually confidential, so clients are unaware the invoice has been discounted.
For agencies with a spread of well-known corporate clients, invoice discounting can represent a significant and flexible credit line that grows in proportion to turnover, without requiring fixed asset security.
Media spend and pass-through costs
Agencies that buy media or production on behalf of clients often advance substantial sums before the client reimburses them. Where these pass-through costs are large relative to the agency's own balance sheet, a short-term revolving facility can prevent a single campaign from consuming the company's entire working capital buffer.
Lenders will typically want to understand how pass-through costs are treated contractually — whether the agency holds credit risk on the media supplier or whether the client bears direct liability.
Contractor and freelancer costs
Many agencies engage freelancers on short-notice contracts to service campaign peaks. Freelancers frequently invoice on completion and expect payment within 14–30 days, compressing the agency's own cash cycle further. A revolving credit facility can absorb these irregular outflows without the agency having to slow project delivery.
Frequently asked questions
Is invoice discounting suitable for a small agency with only a few clients?
Concentration risk — where a high proportion of the ledger is owed by one or two clients — can affect eligibility and the advance rate offered. Some facilities will accommodate concentrated ledgers, particularly where the debtors are large, creditworthy companies, but terms will reflect that risk.
Can an agency use a business loan rather than invoice finance to cover payroll?
A term loan or revolving credit facility can serve the same function, though it is secured against the company rather than against specific invoices. The right structure depends on turnover predictability, the size of the payroll gap and the company's balance sheet position.
Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.