Invoice Finance Up to 90% Advance

How Invoice Finance Works

Invoice finance is a form of business funding that uses your outstanding customer invoices as the basis for a cash advance. When you issue an invoice to a customer with payment terms (typically 30, 60, or 90 days), instead of waiting for payment, you submit the invoice to a finance provider who advances you a percentage of the invoice value immediately.

The typical process works like this: you deliver goods or services to your customer and issue an invoice as normal. You then submit that invoice to the finance provider, who verifies the invoice and advances you up to 85% to 90% of its value, usually within 24 hours. When your customer pays the invoice on their normal terms, the finance provider releases the remaining balance to you, minus their fees.

This cycle repeats continuously, creating an ongoing facility that grows in proportion to your invoicing. As your business wins more contracts and issues more invoices, your available funding increases automatically without needing to apply for a new loan.

Types of Invoice Finance in Australia

There are several types of invoice finance available, each suited to different business situations:

Full-service factoring involves selling your invoices to the finance provider, who then takes responsibility for collecting payment from your customers. This is ideal for businesses that want to outsource their debtor management. Your customers are aware of the arrangement and pay the finance provider directly.

Invoice discounting (confidential) provides the same cash advance but you retain control of your customer relationships and collections. Your customers pay you as normal, and the finance provider operates behind the scenes. This is the preferred option for businesses that want to maintain direct customer relationships.

Selective invoice finance allows you to choose which specific invoices to finance rather than your entire debtor book. This gives maximum flexibility and is useful if you only need to accelerate payment on certain large invoices or from specific customers.

Supply chain finance is a variation where your large customers arrange the invoice finance facility, allowing their suppliers (including you) to receive early payment at favourable rates based on the customer's credit strength rather than yours.

Industries That Benefit Most from Invoice Finance

While invoice finance works for any B2B business with regular invoicing, certain industries benefit particularly:

• Construction and trades: Long payment cycles and progress payments make invoice finance valuable for maintaining cash flow between payments.
• Transport and logistics: Fuel, maintenance, and driver costs occur immediately but freight invoices may not be paid for 30 to 60 days.
• Manufacturing: Raw material costs must be paid upfront while finished goods are invoiced on terms.
• Labour hire and recruitment: Staff wages are paid weekly while client invoices may be on 30 or 60-day terms.
• Professional services: Consulting, legal, and accounting firms that invoice monthly or on project completion.
• Wholesale and distribution: Businesses that purchase stock upfront and sell on credit terms.

Invoice Finance vs Traditional Business Loans

Invoice finance differs from a traditional business loan in several important ways. Unlike a term loan, invoice finance does not create a fixed debt on your balance sheet. The funding is directly tied to your invoices and fluctuates with your business activity. There is no fixed repayment schedule to manage — the facility self-liquidates as your customers pay their invoices.

The assessment criteria are also different. Traditional loans focus heavily on your credit history, profitability, and available security. Invoice finance focuses primarily on the quality of your debtors — the businesses you are invoicing. If your customers are creditworthy companies or government entities, you can often qualify for invoice finance even if your business is relatively new or your own credit is imperfect.

The cost structure is also different. Instead of an annual interest rate, invoice finance is typically charged as a percentage of the invoice value per month. While this can work out to a higher effective cost than a traditional loan, the flexibility, scalability, and speed often make it more cost-effective when you factor in the opportunity cost of waiting 60 to 90 days for payment.