Invoice finance: turn unpaid invoices into cash this week

If your business is profitable but always waiting for money, invoice finance might be the most useful facility you’ve never used. You’ve done the work, issued the invoice, and your customer is good for it. They just won’t pay for 30, 45 or 60 days, while your wages, suppliers and tax are due now. Invoice finance closes that gap by advancing cash against the invoice itself.

How invoice finance works

1. You do the work and invoice your customer as normal.
2. You upload or share the invoice with the invoice finance provider.
3. The provider advances a large share of the invoice value, often within a day or two.
4. Your customer pays on their usual terms.
5. The provider releases the balance, less its fees.

Over time, the facility runs alongside your invoicing. As your sales grow, so does the amount available.

Why it suits difficult files

Invoice finance providers care most about whether your customers will pay. If you invoice established businesses, listed companies or government agencies, the risk sits largely with them, not you. That means invoice finance can work when:

• Your own credit file has defaults
• The bank declined because of a short history or a loss year
• You have little or no property to offer
• You’re growing too fast for a fixed loan to keep up

Who uses it

Industry	Why it fits
Labour hire	Weekly payroll, monthly client payments
Transport and freight	Big customers on long terms
Construction and trades	Progress claims and invoices to builders
Wholesale and distribution	Retailers paying on 30 to 60 days
Manufacturing	Large orders, long payment cycles
B2B services	Consulting, IT, cleaning, security contracts

It doesn’t suit businesses selling to consumers, because there are no business invoices to finance.

Factoring or invoice discounting?

• Factoring: the provider usually manages collections, and customers pay the provider. Useful if you don’t have a strong accounts function.
• Invoice discounting: you manage collections, and the arrangement can be confidential. Usually needs better bookkeeping.
• Selective or single-invoice: fund just the invoices or customers you choose. More flexible, often more expensive per invoice.

Costs to understand

Invoice finance fees are usually a combination of a service or administration fee and a discount or interest charge on the funds advanced. Some facilities have minimum terms or minimum usage. We don’t publish rates. Ask for a worked example based on your real invoices, add up the total cost in dollars per month, and compare it with the cost of the gap: overdraft fees, missed supplier discounts, or lost work you can’t take on.

Security and the PPSR

The provider will typically register a security interest over your receivables on the Personal Property Securities Register. If you have other lenders with general security over the business, they may need to agree on priority. Tell the provider about every existing facility at the start.

Getting set up

Setting up an invoice finance facility usually takes a little longer than a simple loan the first time, because the provider needs to understand your customers and your invoicing. Have these ready:

• An aged debtors report showing who owes you what, and for how long
• Copies of a few recent invoices and the contracts or purchase orders behind them
• Your standard terms of trade and any customer-specific payment terms
• Twelve months of bank statements
• Details of any existing lenders with security over the business

Clean, consistent invoicing makes a huge difference. Invoices that match purchase orders, are issued promptly and are sent to the right person at the customer get paid faster, and providers notice. If disputes or credit notes are common with a particular customer, say so upfront; the provider may still fund that customer, but will want to understand why.

Once the facility is running, keep your ledger tidy. Providers review it regularly, and a well-run ledger often leads to a higher advance rate or lower fees over time.

An illustrative example

A Geelong commercial cleaning company (illustrative only) won contracts with two large property managers paying on 60-day terms. Payroll was weekly, and the bank wouldn’t increase its overdraft because of a loss year two years earlier. An invoice finance provider set up a confidential facility across the company’s ledger. Within a fortnight, most of each invoice was arriving within a couple of days of issue, and the business took on a third contract it would otherwise have turned down.

Stop waiting to get paid

If slow-paying customers are holding your business back, send us a 60-second enquiry. There’s no credit check when you first enquire, we won’t fire your details at a crowd of lenders, and a real person will tell you whether invoice finance fits your customers and cash cycle. Please be accurate about your customers, payment terms and existing lenders on the form so we can match you properly. See if you qualify.