FAQ for Invoice Financing

General Enquiries

CapBay has access to a wide array of funding sources, including multiple banks in Malaysia. We have a growing pool of bank partnerships in which certain banks will purchase your client’s invoice and fund your client. One advantage of this is that your client gets to build a relationship and trading history with the Bank that can help to improve your client’s credit rating with the bank, qualifying your client for more competitive rates.
Read up on CapBay’s humble beginnings here
Invoice financing is a cash flow solution that enables businesses to get advances on money owed by customers upon completion of goods or rendered services, without waiting for the long payment terms that can be from 30 days to 180 days.

Read our article to understand more on Invoice Factoring: What is it &  How it works?

Invoice Financing operates when a business decides to sell their invoices (upon completion of goods or rendered services) to a third party, a Financing or Factoring company at a discount, such as CapBay. CapBay then takes over the task of collecting the receivables as and when they fall due.

When you provide goods or services to a customer on credit, usually you have to adhere to an agreed payment term ranging from 30 days up to 120 days to receive your payment.

With Invoice financing, you can get instant upfront payment of 80% of the invoice amount without having to wait for the payment terms from your customer. You can have full control of your receivables without any worry!

Refer to the illustration below to understand how Invoice Financing works with CapBay:

CapBay’s Invoice Financing solution is an optimal approach for your businesses to improve cash flow as CapBay disburses payment within 48 hours to the borrower. It is also a great way for your business to fund the operating expenses without taking additional financing which can lead to bad debts. Businesses can consider the following before they opt for the type of Invoice Financing that suits their business needs:


  • Financing whole ledger or only a few invoices
    Putting the whole ledger with CapBay but only financing part of the invoices, or do the whole ledger and access more cash flow.
  • Credit control
    Some factoring houses will insist on managing credit control themselves which could affect and damage the customer relationships.

Read our article to know how CapBay Invoice Financing solution can help unlock a new lifeline of cash for your business

You can apply for Invoice Financing with CapBay if:


  • Your business is  providing services or goods to other Malaysian businesses on credit terms (Business-to-Business nature).
  • You have mid-to-large size corporation(s) as customer(s) (private or public)  
  • Your business has an annual revenue of more than RM2 million.
  • Your business is a Malaysian registered business (including sole proprietor, enterprise, and Sdn Bhd.).
  • Your business is majorly owned by Malaysians (more than 51%) and has been in operation for at least 1 year.

*You may also get a quote from us even if you do not meet either one of the required criteria stated here. We can’t promise that we will be able to approve your application but we will consider your application, subject to a case-by-case basis.

Click here to read our article: The most common reasons for seeking business financing in Malaysia

CapBay will finance up to 80% of your invoice value. We are able to offer an invoice financing limit from RM50,000 (minimum) and up to RM1,500,000 (maximum). The tenure of the facility can range from 30 days up to 180 days.

Compulsory documents:

  1. CapBay Term of Service (To be completed with director(s) signature and company stamp)
  2. Copies of directors’ NRIC
  3. Latest Audited Financial Statement (2018 & 2019)
  4. Latest Management account 2019 & 2020 (if audited 2019 is not ready)
  5. Latest 6 months bank statements
  6. Latest Debtor Ageing Summary
  7. Latest Creditor Ageing Summary
  8. PO/Contract/Letter of Award from the proposed customer(s)
  9. Copy of Past 5 Paid Invoices and its corresponding Delivery Orders/Project Completion Reports and Payment Record for each proposed customer
  10.  Company Profile (if any)
  11.  Photos of Business Premise (exterior & interior)

Optional documents:

For better credit assessment and negotiation for lower rates, it is recommended that you  also submit the following documents:

  1. Form 24 & 49; or
  2. Relevant certificates

Read our article on some tips: 11 Ways to Get Your Business Financing Application Approved

Generally, application processes may (from application to approval) take as quick as 5 business days and up to 2 weeks upon complete submission of documents required. To speed up your application process, start preparing your documents as early as possible.

Read our articles on the Top 6 reasons why SME Loans get rejected

For onboarded clients of CapBay, you will receive the advance cash as quick as 48 hours upon submission of invoices in our platform.
For new clients, there will be an extra onboarding process which takes about five (5) working days.
  • Sign up fee: Free of charge
  • Platform Fee: 0.75% – 2.25% on financing amount
  • Discount Fee: 0.8% – 1.5% per month on financing amount (10%-18% per annum)
  • There are no other hidden charges or fees aside from the ones stated. Stamp Duty & Legal Fees are born by CapBay.

Industry Related

The key reason why Construction companies seek financing is due to its specialized nature of diverse tasks involved in the building process, and the involvement of the main contractor to work together with a number of subcontractors, which leads to delays in payments.

Main contractors are large companies that usually have wider access to financing. Besides that, they are also in a position where they don’t need to hold much working capital themselves as they don’t pay subcontractors until they are paid by their client.

Normally, subcontractors are smaller companies and they need huge working capital to pay for purchasing building materials and labors prior to being paid by the main contractor. The issue which construction companies face is the limitation of finance options because of the challenges that lenders face in underwriting SMEs.

It’s common to see manpower agencies seeking to get financing due to the lengthy payment terms to be paid for their services when contractors are paid monthly but clients pay on specific payment terms. Hence, agencies often face obstacles in cash flow management and require financing to reduce their cash flow gap.
The Engineering industry often faces the common problem of delayed payments from the main contractor. Besides that, engineering companies may need the initial funds to purchase materials such as CCTV, wiring, light bulb, and other relevant materials to operate their business.
Manufacturing companies extend their payment terms in order to build a strong relationship with customers. As a result, they face longer payment terms after completion of work and during that time, they would be facing critical shortage of cash flow. They experience cash flow challenges due to the large volume of orders, leasing commitments, and others. A high volume of regular invoices results in restrictions in business growth especially in a highly competitive sector as the payment terms are on credit. Hence, invoice financing can solve the liquidity problem of their cash flow.

Types of Financing

There are 6 main types of short-term financing:


  1. Bank overdraft
    A bank overdraft is a source of financing that enables you to spend more than what is actually in your bank account even if the account has no funds in it or not enough to cover the withdrawal; but it will be limited.
  2. Invoice discounting
    Invoice discounting is an Invoice Finance facility that allows business owners to leverage the value of their sales ledger. When you send out an invoice to your customer, a proportion of the total amount becomes available from the lender, providing an invaluable source of working capital throughout the month.This type of invoice finance is very similar to factoring, the main difference being that your customer may not be aware that you have taken on cash flow finance. You remain in control of the sales ledger, collecting payments as normal and sending out reminders. This allows you to maintain your own style of communication and standards of customer service, on which the success of your company relies.
  3. Factoring
    Invoice factoring is a way for businesses to fund cash flow by selling their invoices to a third party at a discount. The provider will take the role of managing the sales ledger, credit control, and be responsible for chasing payment from your customers. Factoring facility arrangements tend to be restrictive and you will be entering into an assignment of payment account at your customer side. It may also lead to the aggressive chasing of outstanding invoices from your customers. 
  4. Commercial papers
    A commercial paper is an unsecured promissory note. Commercial paper is a money-market security issued by corporations with very high credit ratings to meet short term credit needs. Commercial papers are typically traded on a discount basis, which means that investors usually purchase it below par and receive their face value as it matures. The difference between the purchase price and the face value also known as the interest of the investment.
  5. Trade finance
    Trade finance represents monetary activities related to commerce and international trade. Individuals involved in this type of financing are importers, exporters, banks, issuers, and service providers. For example, an exporter requires an importer to prepay for goods shipped.The importer naturally wants to reduce risk by asking the exporter to document that the goods have been shipped. The importer’s bank assists by providing a Letter of Credit (LOC) to the exporter (or the exporter’s bank) providing for payment upon presentation of certain documents, such as a bill of lading. The exporter’s bank may offer financing to the exporter on the basis of the export contract.
  6. Letter of Credit (LOC)
    A letter of credit, or “credit letter” is a legal document that a financial institution issues to a seller of goods or services. It is a bank guaranteeing that a buyer’s payment to a seller will be received on time and for the correct amount. In the event that the buyer is unable to make a payment on the purchase, the bank will be required to cover the full or remaining amount of the purchase. Hence, the default payment risk of the buyer is transferred from the seller to the issuer of the letter of credit.

Read our article to know when to use short term financing for your business

There are 2 main types of long-term financing:


  1. Equity capital
    Equity capital refers to the portion of a company’s equity, which is raised by trading as stock such as common or preferred stock to a shareholder for cash or an equivalent item of capital value. The meaning of equity can vary by their context. In general, the meaning of equity capital refers to ownership.
  2. Loans
    A loan is a type of long term debt in the company’s account. The borrower initially borrows an amount of money (loan) from the lender such as Banks or other Financiers. The borrower is obligated to pay back an equal amount of the money taken with interest incurred to the lender at a regular installment basis, partial repayments, or annuity.The bank is one of the main providers of loans to corporations or individuals. A secured loan is a loan in which the borrower pledges their assets such as property as collateral to get a lower interest rate due to reduce the bank’s risk. On the other hand, unsecured loans are monetary loans that are not secured against the borrower’s assets with a higher interest rate due to the increasing default risk.
Purchase Order (PO) Financing provides funding for businesses with purchase orders to pay their suppliers and smooth out cash flow.

A Purchase Order (PO) is an order form that is issued from a buyer to a seller. It is also known as an agreement between a buyer and seller on the order of pricing and quantities for a product or service.

Although a positive indication for a business, it can lead to problems for cash flow, primarily because of two things:

  1. the business needs large funds to pay its suppliers to produce the goods for the order, a payment which is usually required prior to supplier production.
  2. Meanwhile, the end customer usually has lengthy payment terms for the product they are receiving. In some cases, this can be up to 120 days. Fulfilling this order requires the business to have substantial financing to fund production until they get paid by the customer.

Purchase order financing is, therefore, an effective and popular option for those businesses which need a quick and effective way to finance their purchase orders.

Spot factoring is also known as single invoice factoring. It is similar to invoice factoring, however instead of selecting which customer’s invoices to submit to the factoring company, businesses are able to choose by selling individual invoices at a discount to a third party, which gives businesses more control. The factoring company collects the debt on behalf of the company. This way you can increase the liquidity of the company’s cash flow in a short term period.
For invoice discounting, individual invoices are sold to a third party at a discount to raise working capital. Discounting customer invoices also involves selling invoices in advance, but the lender collects as if they are a part of the company. This type of invoice financing depends more on the customers’ creditworthiness and underwrites the business’ entire portfolio of customers at once. It tends to be a better play for large, more established companies with established customer bases. Unlike factoring, invoice discounting helps the business keep control over their own sales ledger and client relationships. This is a form of less disruptive invoice financing as customers will not be aware that the invoices had been transferred to the third party.

Selective invoice discounting is similar to spot factoring in which businesses sell individual invoices at a discount price to raise working capital. Usually, factoring facilities work in a way so that the company factors their entire sales ledger.

This can be expensive and not the most cost-effective solution for companies to raise working capital. Therefore, selective invoice discounting is a much more cost-effective solution for small businesses that have seasonal fluctuations in cash flow.

Banks Overdrafts (OD) usually bears a lower interest rate than Invoice Finance but this does not necessarily mean you pay less interest.For example, for an OD facility of RM 1,000,000, a bank can ask you for RM 500,000 as a fixed deposit which means you are only borrowing RM 500,000 from the bank.

However, the Bank will charge you for the whole RM 1,000,000 drawn-down facility. Therefore, you are paying twice the interest for RM 500,000 borrowed. With CapBay’s Invoice Financing, you are only charged for the RM 500,000 you have borrowed.

In Term Loan, say Company A takes a clean loan at 8%. It needs to pay 8% for the whole year even if they do not use the facility for some months during the year.

As for Invoice Finance, say Company A takes invoice financing at 12% per annum. This amounts to 1% interest per month. However, if Company A only needs to use Invoice financing twice in that year, it only needs to pay 1% for each month depending on the invoice tenure. Company A is not required to pay interest for the months when the facility was not used. Invoice financing only charges when it is being used.