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An office where the work is finished, invoiced, and waiting sixty days to be paid

DEBTOR FUNDING

Invoice Finance

If you invoice other businesses and wait thirty, sixty or ninety days to be paid, the money is already yours. Invoice finance advances most of it the week you issue the invoice, and the facility grows as your ledger grows.

See what your ledger funds1300 015 267

  • Lender panel

    40+

  • Two structures

    Factoring or discounting

  • Facility size

    Grows with the ledger

  • Security

    The receivables themselves

Is this you?

If any of these are true, we can help.

Talk it through
  • A labour hire business paying wages weekly and invoicing monthly
  • A transport or logistics operator on long payment terms with large customers
  • A manufacturer or wholesaler whose growth is capped by working capital
  • A services business with a small number of large, creditworthy debtors
  • A company that would rather not put the family home behind a business facility
  • A business turning down work because it cannot fund the ramp-up

How it works

Three moves, in plain words.

  1. 01

    You do the work and issue the invoice

    Nothing changes about how you trade. The invoice has to be for completed, undisputed work to a business customer on ordinary commercial terms.

  2. 02

    The invoice is uploaded to the facility

    Most financiers integrate directly with the common accounting packages, so the ledger syncs rather than being emailed across.

  3. 03

    An advance is paid to you

    The financier advances the majority of the invoice value, commonly the large bulk of it, usually within a day. The exact advance rate depends on your industry, your debtor spread and your dilution history.

Send us the debtors ledger

See what your ledger funds1300 015 267

Factoring and discounting are not the same thing

Both advance money against invoices. The difference is who your customers deal with, and whether they know a financier is involved at all.

The two structures
Factoring (disclosed)Invoice discounting (confidential)
Customer awarenessDisclosed. A notice of assignment goes to your debtorsConfidential. Customers deal only with you
Who collectsThe financier runs collectionsYou continue to collect as normal
Payment goes toThe financier’s accountA trust account in your name that the financier controls
SuitsSmaller businesses, thin credit control resourcesEstablished businesses with proper systems
RequirementsLighterAudited or reviewed ledger, strong reporting, better financials
CostHigher, because collections are includedLower, because you do the work
Perception riskCustomers knowCustomers do not

There is a third option worth knowing about. Selective or single invoice finance funds one invoice or one debtor rather than the whole ledger. It costs more per dollar and it is not a permanent facility, but it is useful when a single large job creates a single large gap.

The detail

How the money actually flows

A ledger of waiting, turned into one payment

Nothing about the way you trade changes. What changes is that the money arrives when the invoice is issued rather than when four different accounts departments get around to it.

Advance rates, eligibility and timing depend on the ledger a financier assesses. Not an offer of credit.

View as a table
InOut
Invoice to a builder, 60-day termsOne advance, paid the day the invoices are uploaded
Invoice to a distributor, 45-day terms
Invoice to a council, 30-day terms
Invoice to a national retailer, 60-day terms
  1. 01

    You do the work and issue the invoice

    Nothing changes about how you trade. The invoice has to be for completed, undisputed work to a business customer on ordinary commercial terms.

  2. 02

    The invoice is uploaded to the facility

    Most financiers integrate directly with the common accounting packages, so the ledger syncs rather than being emailed across.

  3. 03

    An advance is paid to you

    The financier advances the majority of the invoice value, commonly the large bulk of it, usually within a day. The exact advance rate depends on your industry, your debtor spread and your dilution history.

  4. 04

    Your customer pays on their normal terms

    Under factoring they pay the financier. Under discounting they pay into the controlled account, and they never know the facility exists.

  5. 05

    The balance is released, less the fees

    The retained portion comes back to you once the invoice is settled, minus a service fee on the invoice value and a discount charge on the funds while they were drawn.

  6. 06

    The limit moves with the ledger

    This is the point. As sales grow, available funding grows automatically, without renegotiating a limit every time you win a contract.

The terms that decide whether it works

TermWhat it meansWhy it matters
Advance rateThe proportion of each invoice paid to you up frontSets how much cash the facility actually releases
Concentration limitA cap on how much of the funded ledger one debtor can representA business with one dominant customer may be funded on less than it expects
DilutionCredit notes, discounts, disputes and write-offs as a share of salesHigh dilution lowers the advance rate or kills the facility
RecourseWhether you carry the loss if a debtor does not payMost Australian facilities are full recourse unless insured
Non-recourseThe financier or an insurer carries approved debtor defaultCosts more; cover is capped and conditional
Ineligible invoicesProgress claims, retentions, related parties, contra accounts, aged invoicesThese are excluded from the funding base
Notice of assignmentFormal notice to debtors that the debt is assignedOnly applies under a disclosed facility
Minimum term and feesContract period, minimum service fee, exit feeDo not sign a long minimum without modelling the quiet months

What happens to a $100,000 invoice

The advance is not the whole invoice, and the retained slice is not a fee. It comes back to you when the customer pays. Only the third piece is cost, and it is the piece to compare against the alternative.

Illustrative split only. Advance rates and fees are set on your ledger. Not a quote and not an offer of credit.

View as a table
ComponentAmountShare
Advanced within a day$80,00080%
Retained until your customer pays$18,20018%
Service fee and discount charge$1,8002%
Total$100,000100%

Full recourse

  • The common structure in Australia. If your customer does not pay, the advance still has to be repaid.
  • Cheaper, because the financier is funding a receivable rather than insuring it.
  • You keep the credit risk you already carried before the facility existed.
  • Bad debt is managed separately, through your own credit control and trade credit insurance if you want cover.

Non-recourse or insured

  • Default by an approved debtor sits with the financier, or with an insurer behind it.
  • Costs more, and the cover is capped, conditional, and limited to debtors that have been approved.
  • Disputes, credit notes and contra charges are generally not covered. Those are dilution, not default.
  • Read what is actually covered before assuming the risk has moved off your side of the table.
A debtors ledger, which on this product is both the security and the size of the facility
The funding base is not the ledger total. Progress claims, retentions, related parties and anything aged well beyond terms come out first, and what remains is what gets funded.

When it fits, and when it does not

It fits when

  • You sell to businesses or government, on terms, with a clean invoicing trail.
  • You invoice on completion for work already done, not in advance and not on milestones with retentions.
  • Your debtors are creditworthy and reasonably spread.
  • Your growth is genuinely capped by cash rather than by demand.
  • You would rather fund from the ledger than mortgage the family home.

It does not fit when

  • You sell to consumers, or you take payment at the point of sale. There is no ledger to fund.
  • Your invoices are progress claims with retentions, which is why construction subcontractors often find the eligible base much smaller than the ledger.
  • One customer is most of your turnover and the concentration cap bites hard.
  • Your dilution is high because of frequent credit notes or disputes.
  • The real problem is that the business is not profitable. A facility that accelerates cash does not create margin.

The PPSR problem nobody warns you about

An invoice financier needs a first-ranking security interest over your receivables, registered on the Personal Property Securities Register. If you have already given a General Security Agreement to another lender, that registration sits over the same assets, and the invoice facility cannot proceed until the ranking is sorted out.

  1. 01We search the PPSR before approaching a financier, so we know exactly what is registered and by whom.
  2. 02The usual solution is a deed of priority, where the incumbent agrees the invoice financier ranks first over receivables while keeping its own position over everything else.
  3. 03Some incumbents will not consent. In that case the choice is refinancing the incumbent facility or choosing a different working capital route.
  4. 04Suppliers with retention of title clauses also register on the PPSR. Those registrations can affect stock, not receivables, but they show up in the same search and need explaining.

This is the step that most commonly delays an invoice finance settlement, and it is entirely avoidable if it is dealt with at the start.

Comparing the cost against the alternative

Invoice finance is usually priced as two components: a service fee charged as a percentage of invoice value, and a discount charge on the funds actually drawn, calculated for the days they are out. We will not quote either here, because both are set on the profile of your ledger.

  • Compare it against the cost of the alternative, not against zero. If the alternative is an unsecured loan on weekly repayments, or turning down work, the comparison usually favours the facility.
  • Ask for the total expected cost over a year on your actual sales volume, including the minimum service fee in quiet months.
  • Check the minimum contract term and the notice period. Twelve months is common and can be longer.
  • Check what happens to the facility if you lose your largest debtor. The limit can contract sharply.
  • Ask whether the discount charge applies to the funded balance or the whole facility.

Here is the honest number, with the quiet months in it.

WeL’nd
Dave Pham, Head Broker at WeL'nd

“Tell me the number. I have almost certainly seen worse.”

Dave Pham · Head Broker

Talk to Dave1300 015 267

FAQ

Questions people actually ask

If yours is not here, ask it. We would rather answer the awkward one early than have you find out later.

1300 015 267
Will my customers know I am using invoice finance?
Only under a disclosed facility. Factoring involves a notice of assignment to your debtors, and the financier collects. Confidential invoice discounting keeps the arrangement between you and the financier, with your customers continuing to deal only with you. Discounting has stricter entry requirements because you retain the credit control function.
How much of each invoice do I get up front?
A financier advances the majority of the invoice value, with the balance released after your customer pays, less fees. The exact advance rate depends on your industry, your dilution history and the spread of your debtors. Progress claims, retentions and related-party invoices are usually excluded from the funding base entirely.
Is invoice finance a loan?
It is funding against an asset you already own, rather than a term loan with a repayment schedule. The facility rises and falls with your ledger. That said, it is a credit facility with a contract, security, guarantees and fees, and it should be read as carefully as any loan document.
What happens if my customer never pays?
Under a full recourse facility, which is the common structure, the advance still has to be repaid and the debt comes back to you. Non-recourse arrangements shift approved debtor default to the financier or an insurer, cost more, and carry conditions and caps. Do not assume you are covered without reading exactly what is covered.
Can a construction subcontractor use invoice finance?
Sometimes, but the eligible base is often much smaller than the ledger. Progress claims, retentions, contra charges and pay-when-paid arrangements are all difficult for financiers, because the amount owing is not certain until the head contractor certifies it. Some specialist financiers work in this space, and the terms reflect the complexity.
Do I need to fund my whole ledger?
Not necessarily. Whole-of-ledger facilities are the norm and give the best pricing, but selective and single invoice options exist for businesses that want to fund one large job without committing the entire debtor book. They cost more per dollar and suit occasional use rather than an ongoing pattern.
Will I still need to give a personal guarantee?
Usually yes. Directors’ guarantees are standard on invoice facilities, alongside a security interest over the receivables and often a General Security Agreement. What is different from a mortgage is that the family home is not the security, which is the reason many owners prefer this route.
How long does it take to set up?
Longer than an unsecured loan and shorter than a property-secured facility. The financier reviews your ledger, your debtor spread, your dilution and your systems, and any existing PPSR registrations have to be resolved first. That priority negotiation is the usual cause of delay, so it should start on day one.
Can I use invoice finance if I owe the ATO?
It is possible, and disclosure is essential. Financiers check the tax position and are particularly attentive to unpaid superannuation and unlodged returns. An arrears balance with a plan being met is workable for some financiers. Hiding it is not, because it will be found in the bank statements.

Credentials

  • Credit Representative 554029
  • ABN 20 672 801 651
  • FBAA member
  • AFCA external dispute resolution

Related

Other ways we can help

Reading

Worth understanding first

All of business finance

Where we work

Send us the debtors ledger

An aged receivables report tells us in ten minutes whether invoice finance will work for you, and roughly how much it would release.

Or call us

1300 015 267

Monday – Friday, 09:00 to 17:30

Dave Pham, Head Broker at WeL'nd

“Tell me the number. I have almost certainly seen worse.”

Dave Pham · Head Broker

Talk to Dave1300 015 267

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